Over the last several months, solar stocks lost their shine.
In fact, many lost more than 50% of their value. The Invesco Solar ETF (NYSEARCA:TAN), for example, plummeted from about $75 to a low of about $41. First Solar (NASDAQ:FSLR) dropped from $225 to $130. Sunrun (NASDAQ:RUN) fell from $23 to a low of $9.50.
This occurred while U.S. and European demand began to sink, sending revenues for many solar giants significantly lower. Plus, consider that solar stocks were decimated by higher interest rates from the Federal Reserve. This ultimately kept reluctant consumers on the sidelines for most of the year. However, that crisis has created opportunity.
In fact, according to Bloomberg, “Electricity generated from U.S. solar and wind systems will surpass power produced by burning coal for the first time next year, driven by surging panel installations. Developers are expected to install 23 gigawatts of solar capacity this year and an additional 37 gigawatts next year, making it the fastest-growing source of new generation.”
Let’s delve into the top solar stocks already coming back strong.
First Solar (FSLR)
A good deal of negativity has been priced into First Solar. After a bad pullback, the solar stock recently bounced from strong support around $140 back to $165.94. While it’s finding some resistance at the moment at $165.94, I’d like to see FSLR retest $190.
Additionally, net sales for the its latest quarter were $801 million, a decrease of $10 million from the prior quarter. However, FSLR did see third-quarter net income per diluted share of $2.50, compared to net income per diluted share of $1.59 in the second quarter of 2023.
Impressively, Morgan Stanley just upgraded FSLR to an overweight rating, with a $237 price target. They argue the solar stock as a “near-term competitive moat” as a vertically integrated U.S.-based solar-panel maker. And, it has been “a major beneficiary of several recent policy changes in the U.S.,” including the Inflation Reduction Act, as noted by Seeking Alpha.
Sunrun (RUN)
Even Sunrun, which plummeted from about $23 to $9.50, came back strong. Last trading at $18.03, I’d like to see it again challenge $23 in the new year. Also, analysts at Jefferies just initiated a buy rating on the stock, with a $25 price target.
“The analyst’s ‘optimism’ is driven by Sunrun’s greater than 60% market share in a ‘solar as a subscription’ model, predictable cash flow a ‘conservative approach’ to valuation that the firm says still provides upside,” says TipRanks.
Earnings growth hasn’t been too shabby either.
In its third quarter, the company saw a 131% year over year (YOY) increase in installed storage capacity. Revenues jumped from $271.2 million to $316.5 million. Plus, the company added 33,806 customers, bringing its customer count to 754,087. Finally, the company’s annual recurring revenue from subscribers came in over $1.2 billion.
The Invesco Solar ETF (TAN)
If you want to diversify among solar leaders at a lower cost, there’s an exchange-traded fund like the Invesco Solar ETF. After dropping from about $75 to $41, it also appears to have caught strong support, last trading at $50.60. I’d like to see TAN closer to $60 in the New Year.
With an expense ratio of 0.69%, the fund invests at least 90% of its total assets in the securities that make up the MAC Global Solar Energy Index. Some of those top holdings include Enphase Energy (NASDAQ:ENPH), First Solar, SolarEdge (NASDAQ:SEDG), and Sunrun.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
