Given the enthusiasm of many analysts and investors for clean energy and ESG (environmental, social and governance) stocks, Goldman Sachs analysts’ shares on Monday may look a bit off balance. In a research note, the company calls four solar power stocks to buy, three to stay neutral, and three to sell.
Analysts Brian Lee and Baoyi Zhou wrote that overall they remained positive on solar stocks in 2021, citing long-term growth prospects, cheap funding and renewed government support. The downside, however, is the oversupply.
Analysts estimate that around 120 gigawatts (GW) of new module capacity in 2020 and 2021 far exceeds some 25 GW of new demand. This will lower factory utilization rates and put pressure on prices and margins for solar panel manufacturers.
Growth in solar installations is expected to reach 18% in 2021 (134 GW), and the compound annual growth rate is expected to be 17% through 2024. Analysts also expect battery storage sales to double. year on year, with demand continuing to outstrip supply and push up prices and margins.
Here are the 10 solar stocks Goldman took a look at.
Sunnova Energy International Inc. (NYSE: NOVA) provides residential solar energy and energy storage services to approximately 80,000 customers, including operation, maintenance and upgrades. Over the past 12 months, the stock has added around 290% to its price. Stocks posted a new 52-week high on Monday.
The company was on Goldman’s Americas Conviction buy list, and analysts have raised their price target for the share from $ 45 to $ 60. The average target is $ 40.50, although Sunnova is not expected to make a profit for two years. The stock is trading at a multiple of 26.8 from expected sales in 2020 and 19.9 in 2021.
The stock traded up more than 2% on Tuesday morning, to $ 45.97 in a 52-week range of $ 6.12 to $ 49.34. Based on Goldman’s price target, the 12-month upside potential for Sunnova stock is 33%.
Enphase Energy Inc. (NASDAQ: ENPH) manufactures devices known as microinverters that attach to each module of a solar panel and convert direct current to alternating current. The company also manufactures software for monitoring and controlling solar installations. Its shares rose more than 570% in 2020.
Goldman Sachs upgraded its rating on Enphase from Neutral to Buy and raised the price target from $ 258 to $ 313. The average price target is $ 126.50 and the earnings per share (EPS) multiple expected for 2021 is 92.6, falling to 68.7 in 2022.
The shares traded more than 6% at $ 182.60, in a 52-week range of $ 21.49 to $ 189.41. Enphase is up 35% potential, based on Goldman’s 12-month price target.