Solar energy stocks have been depressed in the last few quarters. This has translated into several stocks trading at a valuation gap. I believe that the correction presents a good buying opportunity with some of the best solar energy stocks poised for a strong comeback.
An important reason for weak numbers from solar companies is macroeconomic headwinds in the U.S. and Europe. Further, with high interest rates, demand for solar projects from retail consumers has been sluggish. However, the key point is that these are near term headwinds.
The long-term outlook for growth in the solar energy sector remains positive. According to the International Energy Agency, approximately 100 million people will rely on rooftop solar energy by 2030. It’s also being estimated and wind and solar will produce over a third of global power by 2030.
Therefore, the current correction is solar energy stocks is a golden opportunity to accumulate. Let’s discuss some of the best stocks to buy for a strong comeback.
Canadian Solar (CSIQ)
From a valuation perspective, Canadian Solar (NASDAQ:CSIQ) is among the most attractive solar energy stocks to buy. At a forward price-to-earnings ratio of 5.7, CSIQ stock seems poised for a big reversal rally.
For Q3 2023, Canadian Solar reported a 39% year-on-year growth in shipments to 8.3GW. However, total revenue declined by 4% to $1.8 billion. It’s worth noting that the company’s subsidiary, Recurrent Energy, is likely to be a key growth driver.
As of Q3, the subsidiary reported a solar development pipeline of 26 GW and battery storage development pipeline of 55 GWh. In January, Recurrent Energy announced a $500 million preferred equity investment commitment from BlackRock. These funds will be utilized towards the high value project development pipeline.
I also like the fact that Canadian Solar has strong global presence in 25 countries. Further, revenue from Asia (excluding China) is just 11% of total revenue. There is ample scope for growth in emerging markets.
First Solar (FSLR)
In the last 12 months, First Solar (NASDAQ:FSLR) stock has remained sideways. As positive business developments continue, I expect a big breakout rally. It’s worth noting that FSLR stock trades at an attractive forward price-to-earnings ratio of 20.1.
An important point to note is that First Solar has cumulatively invested $1.5 billion in research and development. The company claims to be the global leader in thin film PV. Backed by the CadTel PV technology, First Solar’s order book has been swelling.
For Q3 2023, First Solar reported a total booking backlog of 81.8GW through 2030. Further, the company has potential booking opportunities of 65.9GW. With healthy order intake, the revenue visibility remains robust.
The company is investing in multiple factories that will enable it to service the backlog. First Solar has guided for a global annual nameplate manufacturing capacity of over 21 gigawatts (GW) by 2026. With investment in innovation coupled with manufacturing expansion, the is positive for this solar energy stock.
Enphase Energy (ENPH)
There seems to be signs of Enphase Energy (NASDAQ:ENPH) stock bottoming out. In the last six months, the stock has remained sideways. However, it’s likely that the stock will trend higher after an extended bearish price action.
As an overview, Enphase is a provider of microinverter-based solar-plus-storage systems. The company has already shipped 73 million microinverters globally. The IQ8 is the world’s first grid-forming microinverter for the residential markets.
The company has also launched an IQ EV charger that integrates into Enphase’s solar and battery system. With innovative products and over 400 patents globally, Enphase is positioned for sustained growth. The company believes that the serviceable addressable market is likely to be $23 billion by 2025, which provides ample headroom for growth.
It’s worth noting that as of Q4 2023, Enphase reported $1.7 billion in cash and equivalents. Further, the company reported operating cash flow of $697 million for 2023. Financial flexibility is therefore high for investment in expansion and R&D.
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.
