The world is shifting to a more environmentally friendly approach, with people looking for solutions such as solar to deal with climate change and decrease carbon footprints. At the end of 2022, the US already had around 3.9 millionphotovoltaic solar power systems. The pace of growth has been an outstanding 37% YOY, and demand only seems to be rising.
According to the U.S Energy Information Administration, solar is still and will continue to be the country’s fastest-growing renewable energy source due to favorable tax credits and political backdrop. Additionally, due to solar’s long-lasting potential when it comes to the challenges provided by climate change, it’s clear that solar power generation will keep expanding in the years to come.
Even though solar energy has been volatile lately due to the rising prices, investors see room for opportunity in this growing renewable energy sector. As such, here are three solar stocks to keep an eye on this May 2024 to take advantage of increasing interest in solar power.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is a solar manufacturing industry leader and the world’s most prominent photovoltaic solar energy provider. Yahoo Finance analysts estimate that the stock will trade within a one-year price range between a low of $157.56 and a high of $356.0.
One of the biggest growth drivers for First Solar has been its robust expansion plans, which are duly supported by larger tax benefits from the Inflation Reduction Act. Already, the company has been reported to be expanding facilities into more low-cost areas including Alabama, Arizona and Ohio. Just last year, for instance, the company announced plans to spend up to $1.1 billion on its fifth U.S. factory, which is set to start production in 2026.
Financially wise, credits such as the IRA have also been crucial in supporting growing margins and valuation. Management expects that IRA tax benefits, in particular, are expected to boost company margins by nearly 30%. Given that FSLR’s P/E ratio of 20.71 is currently sitting 10% below its sector median, First Solar presents an excellent opportunity for investors wishing to enter the solar market.
Sunrun (RUN)
Sunrun (NASDAQ:RUN) is best known for its direct-to-consumer marketing presence and leading support of solar design and installation across the U.S. While this stock has seen a near 20% drop over the past year, analysts still have mixed optimism about this company. This sentiment has been reflected in Wallstreet analyst’s one-year price targets, which range from a low of $7.78 to a high of $42.
While solar has taken a toll recently, Sunrun’s storage segment has become a pocket of opportunity. Management has already guided that they hope to shift the company into a storage-first company to boost margin and allow for more value creation potential. In its most recent earnings, Sunrun saw a 50% increase in new storage installments, and even announced two new grid service programs, “CalReady” and “PowerOn Puerto Rico”.
As Sunrun continues to execute this margin-focused sustainable growth strategy, investors can look forward to increased earnings and the potential realization of a $500 million target by Q4. With a price-to-book (P/B) ratio nearly 75% lower than its 5Y historical values, investors should consider this company as a discounted, high-growth solar investment.
Brookfield Renewable (BEP)
Brookfield Renewable Partners LP (NASDAQ:BEP) is one of the world’s largest investors in renewable assets including solar energy. Looking at solar particularly, BEP has over 211 solar-related facilities and installs over 7000 MW of capacity. Yahoo Finance analysts estimate that the stock will trade between an average of $20 per share and a high of $32.00.
Investors looking to invest in solar and renewable energy as a whole can look at Brookfield as a more diversified and low-risk option. At a high level, an investment in BEP offers durable cash flows with levers that help deliver investors around 12%-15% in total returns. In the recent earnings, management has also detailed increased investments into solar projects due to its high cash margins, zero fuel input cost, and scalability.
Another main appeal of Brookfield is its strong financials and dividend yield. The company currently maintains a dividend yield of nearly 5%, as opposed to its industry median of around 4%. With the P/B ratio also slightly discounted compared to its 5Y historical averages, now is a great time to scoop up a few shares of this large solar asset investor.
On the date of publication, Ian Hartana and Vayun Chugh 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.
