Just over a month into the start of 2021, solar stocks have shown mixed performance this year.
Companies that posted strong quarterly results recently traded at new highs. In contrast, solar investors have severely sanctioned companies for their weak results and disappointing prospects. But despite the varying results for the quarter, investors can choose from these solar stocks that could see strong growth in 2021.
Here are 7 solar stocks to buy hoping for a bright new year:
- MasTec (NYSE:MTZ)
- Enphase Energy (NASDAQ:ENPH)
- SunPower (NASDAQ:SPWR)
- First solar (NASDAQ:FSLR)
- SolarEdge Technologies (NASDAQ:SEDG)
- Sunrun (NASDAQ:CLASSES)
- Canadian solar (NASDAQ:CSIQ)
Some of these choices are not direct producers of solar power, but games whose prospects always depend on improving the outlook for the solar stock.
MasTec is an engineering and construction company. Investors should view it as a diversified company whose growth catalysts in communications and clean energy will increase its value in the future. As one of the country’s largest clean energy entrepreneurs, the company specializes in segments such as solar farms, wind farms and biomass facilities.
MasTec is a new player in the field of solar energy. Historically, it has been in the wind business. Although he only joined the solar space less than a year ago, CEO Jose Mas said he believes the company will outgrow its wind business in the next few years. Mas said on the recent third quarter 2020 results conference call that solar will do well in 2021, especially compared to this year.
As stated above, MasTec performs well in terms of value, growth, quality and sentiment. Although the stock price has more than doubled from April lows, the stock still has an edge for investors due to its future acceleration in growth.
Enphase Energy (ENPH)
Enphase Energy added about $ 25 to its share price after reporting strong third quarter results. Its adjusted gross margin of 41% is greater than 36.2% from last year. It shipped approximately 478 megawatts DC, or 1,442,743 microinverters during the period.
Enphase is the world’s leading supplier of microinverter-based solar-plus-storage systems. The Enphase Encharge 10 and Encharge 3 storage systems are examples of its emergency power solution for homeowners. CEO Kothandaraman expects lower gross margin the range 35%. And since the 50 megawatt-hour capacity in the fourth quarter is largely reserved, the company has significant growth ahead in the coming quarters.
Enphase has an unfavorable value score, but its growth and quality more than makes up for that.
SunPower is trading on a strong uptrend, reaffirmed by a strong third quarter report. The company benefited from strong sales growth in the second half of its fast growing solar power and storage products.
Profits increase due to improved gross loan / lease margins. With new homes building both backlog and reservation records, investors cannot sit on the sidelines when it comes to SunPower stocks. In 2021, SunVault, a storage and service offering, will add $ 100 million to SunPower’s 2021 revenue.
In the third quarter, the company was able to add 10,519 customers, have 50,000 new homes on hold and generate most sales through online or virtual sales methods despite the challenges of a global pandemic. Since the gross margin has tended to increase since the second quarter of 2019, investors should expect profits to increase as revenues increase.
SunPower projects GAAP net income of between $ 11 million and $ 21 million in the fourth quarter. Net profit will amount to $ 200 million for fiscal 2020. The simplywall.st, the SPWR share has a fair value of $ 25.25. Conversely, the average price target is $ 15.59 (according to Tipranks).
Premier Solar (FSLR)
Trading near its annual highs, First Solar is not a bargain, but remains a value to hold as the outlook continues to improve.
The company has recorded annual bookings of 3.8 GW at September 30. North America represents the largest reservation opportunity market, with Europe in second position. The total opportunity is 8.3 GW.
In Q3, CFO Alex Bradley gross margins were around 29.5%. The company benefited from a decrease in its guarantee liability of $ 20 million. End-of-life recycling also fell by $ 19 million.
Capital investments will strengthen First Solar’s prospects. As he searches for the most disruptive and cheapest factory, capital expenditure per watt will be lower for his Series 6 technology. CEO Mark Widmar said market demand for the Series 6 is still strong because the company recorded a record quarterly production.
Solar investors are expected to own FSLR shares.
SolarEdge Technologies (SEDG)
A disappointing third quarter report and outlook from SolarEdge pushed SEDG shares down sharply after earnings.
The company posted revenue down 17.7% year-over-year to $ 338.1 million. The 83-cent GAAP EPS beat consensus estimates. Yet at a futures price / earnings ratio of over 60 times, SEDG shares must fall further before investors begin a position.
Solar activity increased by 1% compared to the last year to $ 312.5 million. Solar business non-GAAP gross margin edged up to 34.8% from 33.8% sequentially but down from 35.4% last year.
SolarEdge is a story from 2021. Stock valuations have moved faster than the fundamental strength of the company. For example, he estimated turnover in the range of $ 345 million to $ 365 million. It’s not a lot of growth compared to T3. In addition, non-GAAP gross margins will be between 34% and 36%. Again, SEDG does not demonstrate earnings expansion.
Buy SEDG shares in 2021.
After peaking at over $ 75, Sunrun has started to move lower since October. The strong third quarter earnings report indicates that this solar power stock has a bright future ahead of it.
Sunrun saw a 20% increase in its customers, to 326,000. At 109 megawatts deployed, this is a sequential increase of 40%. CEO Lynn Jurich said, “We are in the early stages of significant innovation in the electrification of our buildings and transportation. As consumers associate the brand with powering the home with renewable energy, Sunrun is the stock to own.
Sunrun grew in size after acquiring Vivint Solar, with a customer base now of over 500,000. Thus, the growth of battery installations of over 45% YoY reaffirms its strong business momentum.
The company’s customer margin of around $ 6,500 in the third quarter is a good measure of its Unity is strength. As gradual blackouts in California and the northeastern United States potentially increase, Sunrun will provide homes with essential electricity at that time.
Canadian Solar (CSIQ)
Canadian Solar forecasts strong demand in 2021. Investors are expected to buy the stock even though stocks have more than doubled from summer lows. The company module shipments posted in T2 of 2.9 GW. The gross margin improved to 21.2% from 17.6% last year.
For the third quarter, Canadian Solar is forecasting revenues of $ 840 million to $ 890 million. Total module shipments will be 2.9 to 3.1 GW while the gross margin will decrease from 14 to 16%. In 2021, management expects strong demand. If the company can improve its margins, profits will also increase.
COO Yan Zhuang said, “We are enjoying a rebound in demand in most of our markets, with our backlog for the second half of 2020 and even next year already exceeding our previous expectations. CSIQ will continue to face supply disruptions and a short-term polysilicon shortage. But as capacity increases, vertical integration into its modules business will allow it to capture a greater share of the global market.
Disclosure: As of the date of publication, Chris Lau does not have (directly or indirectly) any position on any of the titles mentioned in this article.
Chris Lau is a contributing author for InvestorPlace.com and many other financial sites. Chris has over 20 years of experience investing in the stock market and leads the Do-It-Yourself Value Market on Seeking Alpha. He shares his stock picks so readers get original information that helps improve returns on investment.