The International Energy Agency reported that solar will become the largest source of power in the world, surpassing coal, by 2027. Moreover, the agency forecasts that global solar output will more than double by that year, with the energy source’s capacity continually climbing over that time period. The entity explained that utility-scale solar PV is the cheapest option for generating new electricity in most countries around the globe. Finally, rooftop solar will also increase rapidly due to rising electricity bills and government support, the agency stated. Given the expected rapid growth of solar, investors should buy these three top solar stock picks.
First Solar (FSLR)
According to Investor’s Business Daily, U.S.-based solar panel maker First Solar (NASDAQ:FSLR) has a relative strength rating of 94, showing that it has become a favorite name for many investors over the past year. Yet it has an accumulation/distribution score of B- on IBD’s scale, indicating that institutional investors have not been extremely enthusiastic about FSLR over the last 13 weeks.
But that could change after the company reported stronger-than-expected second-quarter results on July 27. The results featured an increase in its earnings per share to $1.59 from just 40 cents during the company’s first quarter. Additionally, FSLR stated that it would open a new factory in the U.S. in 2026, suggesting its demand outlook in America is very strong.
Investors have generally embraced the shares, but institutional buyers still have reservations. However, the company’s fundamentals are strong and improving. Given these points, FSLR is nearing a super attractive entry point.
NextEra Energy (NEE)
The leading developer of solar energy in the U.S., NextEra (NYSE:NEE) has an earnings per share rating of 90 from Investor’s Business Daily, indicating the company is quite profitable.
Indeed, analysts — on average — predict its earnings per share will come in at $3.40 in 2024, up from $2.90 in 2022. Also noteworthy is that Investor’s Business Daily gives NEE an accumulation/distribution grade of B. The grade indicates that institutional investors have been warming up to the name over the past 13 weeks.
Further, NEE’s net income jumped nearly 100% last quarter, reaching $2.8 billion, versus $1.38 billion during the same period a year earlier. Amazingly, the net income of the company’s renewable energy unit soared over 10 times versus the same period a year earlier to $1.46 billion.
And in-line with my prior forecasts, Florida Power & Light, the country’s largest electric utility, rapidly expanded during Q2, gaining 66,000 more customers year-over-year (YOY).
As with FSLR, NEE’s strong fundamentals and increasing interest by institutional investors indicate the stock is nearing a super attractive entry point.
SolarEdge Technologies (SEDG)
Israel-based SolarEdge Technologies (NASDAQ:SEDG) specializes in making inverters used to convert solar energy into electricity.
SEDG stock has sunk in recent weeks, falling from $283 .85 at the market close on July 17 to $236.79 at the close on July 28. I believe SEDG’s retreat was primarily caused by worries about higher interest rates, coupled with weaker-than-expected Q2 results reported by its top competitor, Enphase (NASDAQ:ENPH).
However, ENPH reported that its business was booming in Europe, as its sales in the region jumped 25% for the quarter and more than tripled YOY. But Enphase gets nearly 59% of its revenue from the U.S., where demand slowed outside California.
Conversely, SEDG generated 47% of its sales a year ago from Europe, leaving it significantly better positioned than ENPH. Many investors may not realize the distinction, but they likely will after the company reports its Q2 results on August 1.
Finally, in the wake of the stock’s recent retreat, its forward price-earnings ratio is an attractive 24.3.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
