Solar stocks have seen brighter days.
Even with a strong potential backlog, some of the best solar stocks have been in a correction mode for the past few quarters. Macroeconomic challenges that translate into lower demand and high inventory are to blame for the depressed sentiments. Further, the instillation of residential solar projects involve relatively higher costs, especially as interest rates remain high.
Notably, most of these challenges are temporary. Therefore, the correction in some of the best solar stocks is a good opportunity to accumulate. Further, global renewable energy capacity is expected to grow by two and a half times by 2030. Solar energy will be a major contributor to this growth. As another report suggests, wind and solar will contribute to 33% of global power by 2030.
Thus, let’s explore three of the best solar stocks to buy and hold for multibagger returns.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) stock has been subdued in the last 12 months with negative returns of 8%. A strong breakout on the upside is imminent after this phase of consolidation. Considering the impending growth, FSLR looks attractive at a forward price-earnings ratio of 19.5.
Also, First Solar reported total booking backlog of 81.8GW that extends through 2030. Regarding the backlog, the order intake for year to date (YTD) was at 27.8GW. The intake has been robust and sets stage for potential revenue acceleration. Further, First Solar has total booking opportunities of 65.9GW.
Besides the robust order intake, FSLR has been ramping-up manufacturing capacity. The company’s facility in India is completed, with Alabama and Louisiana due for completion in 2024 and 2025 respectively. Additionally, First Solar has been aggressive on the R&D investment front. This is likely to ensure that growth remains healthy in the coming years.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) is a massively undervalued solar stock to buy. At a forward price-earnings (P/E) ratio of 5.5, CSIQ looks poised to double in quick time. I am also bullish on the long-term outlook for the company.
In a recent news, its subsidiary Recurrent Energy secured $160 million in project financing for its 127MWdc Bayou Galion Solar project. And, Microsoft (NASDAQ:MSFT) will be purchasing 100% of the energy and renewable energy credits produced from this project.
Also, Recurrent Energy has received $500 million in financing from BlackRock. These financing agreements for high value project development pipeline will ensure growth and. Notably, Recurrent Energy had a global development pipeline of 26 GW in solar and 55 GWh in storage space.
Furthermore, CSIQ has a solar module shipment guidance of 30.5GW for 2023. For the current year, the shipment guidance is at 45GW (mid-range). Clearly, growth is visible for Canadian Solar, along with its subsidiary.
SolarEdge Technologies (SEDG)
SolarEdge Technologies (NASDAQ:SEDG) has witnessed a big correction of 75% in the last 12 months. Possibly, the sell-off is overdone. SEDG looks attractive at a forward (P/E) ratio of 20.5. Some consolidation seems likely before possible margin expansion triggers a breakout rally.
A major reason to like SolarEdge is strong global presence coupled with investment in innovation. The company has been awarded 538 patents with another 503 patent applications.
Also, in the last three years, the company’s revenue increased at a CAGR of 46%. With wide presence in residential and commercial solar business, expect healthy revenue growth to sustain.
Finally, SEDG derives 62% of revenue from Europe. I would wait for economic activity in the region to accelerate. That’s a key catalyst for SEDG stock coupled with potential improvement in margins in the coming quarters.
On the date of publication, Faisal Humayun 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.
