It has been an ugly summer for many solar stocks, as high U.S. interest rates dealt a considerable blow to the U.S. residential solar market, excluding California. As a result, since peaking in July, the Invesco Solar ETF (NYSEArca: TAN) has sunk nearly 15%. Still, about 20 gigawatts of solar power were installed in American companies and homes last year, while utilities and other huge electricity producers deployed 75 gigawatts. And I’ve yet to see evidence that the latter entities have slowed down their solar power installation due to the higher interest rates.
Meanwhile, Europe is expected to implement 41 gigawatts of solar power this year. I have yet to find evidence that elevated interest rates will slow the bloc’s adoption of solar. Therefore, investing in stocks with high exposure to large-scale U.S. solar deployments and Europe makes great sense. With that said, here are the three best solar stocks to buy in August.
Shoals Technologies (SHLS)
Shoals Technologies (NASDAQ:SHLS) provides electrical systems that are used in conjunction with large solar projects. The company is growing rapidly and is profitable, while the valuation of SHLS stock is very attractive.
Last quarter, Shoals’ top line soared 62% to $119.2 million versus the same period a year earlier, while its “backlog and awarded orders” jumped 67% YOY to $546 million. On the bottom line, its net income soared 159% to $18.9 million.
Meanwhile, Shoals’ outlook is great because it has a great deal of exposure to both large-scale solar in the U.S. and the European solar sector.
The stock has a trailing price-earnings ratio of 22. Given the company’s tremendous growth, that’s a very attractive valuation.
First Solar (FSLR)
Like Shoals, First Solar (NASDAQ:FSLR) has a great deal of exposure to large-scale solar deployments in the U.S. and Europe. But FSLR also has exposure to many other regions worldwide in which solar energy is expanding, such as India. Additionally, FSLR, which has three factories in the U.S. and is building a fourth, is poised to benefit a great deal from America’s production tax credit.
Also, similarly to Shoals, FSLR reported robust Q2 results. Specifically, FSLR’s Q2 revenue soared 30.6% versus the same period a year earlier. At the same time, its diluted earnings per share jumped to $1.59.
Analysts, on average, expect the company to generate earnings per share of $13.25 in 2024, up from just 41 cents in 2022. FSLR stock has a forward price-earnings ratio of just 26. That’s a very attractive valuation, given the extent to which the company’s profits are expected to surge and its many strong, positive catalysts.
Array Technologies (ARRY)
Array Technologies (NASDAQ:ARRY) markets “ground mounting trackers” primarily used with large-scale solar projects.
The firm reported solid Q2 results on Aug. 8 as its revenue soared nearly 21% versus a year earlier. Even more impressively, the company’s net income came in at $65 million versus an adjusted net income of $12.9 million during the same period a year earlier.
Also noteworthy is that the shares are changing hands at an attractive adjusted forward price-earnings ratio of about 22 times.
In the wake of the company’s Q2 results, JPMorgan kept an “overweight rating on the shares, according to fintel.io. Meanwhile, analysts’ average price target o the name was $28.78, well above the stock’s current level.
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.
