3 disgraced solar stocks to buy now

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The solar industry has exploded into the energy scene over the past two decades and does not appear to be slowing down any time soon. According to Our World in Data and PA, the total solar installations in the world have increased from 0.65 gigawatts in 2000 to 40.1 GW in 2010 and 708 GW in 2020. That’s enough to power 116 million American homes.

Despite this growth, not all solar energy stocks have outperformed the market over the past two decades. And some stocks have fallen out of favor for one reason or another. Three of our contributors think First solar (NASDAQ: FSLR), Deploy Technologies (NASDAQ: ARRY), and Enphase Energy (NASDAQ: ENPH) are three of the stocks that may not be liked by the market, but should be in your portfolio today.

Image source: Getty Images.

Growth is coming for this solar manufacturer

Travis Hoium (First Solar): Solar panel makers have been sort of overlooked by the market for much of the past half decade as they struggled to generate the growth and profitability that investors were hoping for. But financial data is improving again as the industry matures and First Solar looks attractive to investors again.

You can see below that over the past four years, First Solar’s bottom line has improved significantly, despite stagnant revenues, and continues to maintain a strong cash position. This improved financial situation is what has given management the confidence to announce plans to almost double manufacturing capacity from less than 8 GW this year to around 16 GW in 2024. The improved scale should help. improve revenues, but it could also help improve the bottom line as First Solar leverages its internal research to improve the performance of its products.

FSLR Revenue Graph (TTM)

FSLR Income (TTM) given by YCharts

What I like about First Solar today is that it is reasonably priced for investors, has a lot of money, and it could be growth stock in solar power. On the price front, stocks are trading at 20 times earnings, which is relatively inexpensive in today’s market. That’s without removing the $ 2.1 billion in cash on the balance sheet today or the $ 1.35 to 1.45 billion in net cash that is expected to be on the balance sheet at the end of the year.

On the growth front, increasing First Solar’s production over the next three years is expected to significantly improve its financial performance. And with stocks traded at a reasonable valuation and an unparalleled company track record, this is a solar stock I wouldn’t overlook.

Large solar installations should continue to grow

Howard Smith (Array Technologies): It may not seem out of favor with shares rising 40% over the past month, but Array Technologies shares are still down 56% in 2021. The company manufactures ground systems used in large projects solar energy. Array stock plunged 46% the day after its first quarter results were released for the period ending March 31. The rapid increase in input and freight costs caused the company to withdraw its forecast and revise its plans for profitability levels.

But since then, Array has made supply agreements that fix 85% of its input costs for the rest of the year. The company said in its second quarter earnings report that nearly all of its steel needs are now on hold for 2021 as the company has domestic and global agreements with two steel suppliers.

The increased visibility contributed to a partial rally in the share price over the past month. And the company itself should support it. As of June 30, Array had a record total of $ 882 million in completed contracts and orders awarded. And secular trends in solar generating capacity growth are expected to continue.

A recent brief released by the US Department of Energy said that although solar power has been the fastest growing renewable energy source in the country over the past decade, the growth rate must accelerate. The report states that to meet decarbonization targets, “solar deployment should accelerate up to three to four times faster than its current rate by 2030”. The DOE estimates that solar could rise from its current level of 3% of production to more than 40% by 2035.

Now that Array can include known input costs in the project schedule, it can be sure to receive acceptable returns. In the second quarter report, Nipul Patel’s chief financial officer said: “We are already seeing margins on new orders that are in line with our past performance and in some cases even higher. This bodes well for future returns.

Large-scale solar power plant on a grassy hill.

Image source: Getty Images.

Enphase wastes no time getting back to hyper-growth

Daniel Foelber (Enphase Energy): Investors in Enphase Energy had plenty of reason to smile as the stock rebounded from a share price of around $ 1 four years ago to $ 174 per share at the time of writing. . Enphase has been added to the S&P 500 after a monster year where the company proved it could sustain growth (albeit at a lower rate) during the height of the pandemic. If Enphase had been in the S&P 500 in 2020, it would have been the second best performing title behind You’re here.

2021 was a different story. Enphase stock has lost some of its strength, currently ranking in the bottom 20% of the S&P 500 (and was in the bottom 10% before its recent rebound). In reality, the stock’s underperformance could be little more than a simple slowdown after the almost six-fold increase last year. It sounds counterintuitive, but Enphase’s underperformance in 2021 could actually be good for long-term investors. The company is currently trading at a borderline nosebleed valuation compared to other major solar stocks. Giving the company a chance to grow in its valuation could give it a more solid baseline to beat the market in years to come.

The good news is that Enphase – the company, not the stock – has returned to its meteoric growth rate, generating the same amount of revenue in its final quarter as it did in 2019. Over for the first half of 2021 only. , the company shipped approximately 4.81 million microinverters (1,626 megawatts DC) compared to 6.83 million microinverters (2,238 megawatts DC) in the year 2020.

Metric

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Microinverters shipped

2.36 million

2.45 million

2.29 million

1.44 million

1.09 million

2.01 million

Megawatts DC

796

830

762

478

355

643

Data source: Enphase Energy

Enphase’s dominant position in the US solar microinverter industry, growing energy storage business, success in Europe and continued expansion to South America via Brazil and Asia-Pacific via Australia indicate sustained growth on the world stage. Pair a large addressable total market with the fact that solar energy costs continue to drop, and you have a business that could very well continue to grow at a rapid rate.

Ride the wave of solar growth

Solar energy continues to grow around the world, and products like solar panels, shelving and inverters are essential to this growth. That’s why First Solar, Array Technologies, and Enphase Energy are designed to grow for the long term, making them great solar stocks for investors today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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