Did you see the solar stocks on Monday? This particular green sector has turned parabolic! While the S&P 500 fell by 0.7%, the whole Invesco Solar Portfolio ETF (NYSEARCA:BRONZER) posted a very impressive 3.6% gain (plus 0.7% after-hours pop), punctuated by a 10% gain in Daqo Energy (NYSE:QD) and a 9% gain in SunPower (NASDAQ:SPWR).
The catalyst? A bullish note from the Bank of Wall Street Jefferies, who has widely said that the current polysilicon supply chain problems plaguing the industry will ease in 2022, drastically lowering installation prices for solar panels and unleashing a ton of pent-up demand that has been scared of the high prices of solar energy in 2021.
We could not agree more with this thesis.
In short, the solar industry has been supported by falling costs over the past decade. As technology has improved and supply chains have benefited from economies of scale, the cost of installing solar power has dropped dramatically, which, not coincidentally, is has resulted in increased demand for solar power.
But that trend was reversed in 2021, thanks to polysilicon supply shortages, which caused polysilicon prices to soar and led to a year-over-year increase in the cost of solar panel installations. Faced with concerns about these rising costs, solar inventories fell in 2021, after a scorching 2020.
This is a temporary phenomenon.
The polysilicon supply shortages that are hurting the solar industry are a direct result of supply chain disruptions linked to Covid. But Covid-19 is increasingly becoming a smaller and smaller problem on the global stage, and it seems increasingly likely that several production plants will come back online at 100% capacity in 2022.
This includes polysilicon makers, which means polysilicon supply is expected to rebound to “normal” levels in 2022.
In this case, the supply-demand imbalance in the solar market will be corrected, prices will resume their downtrend and demand will increase – because you’re going to have all these people who were planning to go solar in 2021 but were ultimately scared. by prices, flooding the market in 2022 as installation prices plunge.
From a financial perspective, solar companies will benefit from higher demand, higher pricing power, and larger profit margins – which means a lot, a lot bigger profits.
The investment opportunity?
Solar stocks were squashed in 2021. The Invesco Solar ETF is down more than 20% year-to-date, compared to a 16% gain for the S&P 500. Many solar stocks are trading at their valuations the cheapest for over a year.
And yet, those same stocks are poised to experience increased revenue, margins and profits in 2022.
This will result in these beaten actions and cheaper than usual soaring over the next 12 months.
The time to buy is now.
This is especially true because, as solar stocks plummeted in 2021, scientists in the solar industry have been busy advancing huge technological breakthroughs with enormous success.
The biggest of these breakthroughs has to do with what is called perovskites.
Long story short, solar cells are built on semiconductors because these semiconductors allow solar systems to turn raw sunlight into usable electricity. Traditionally, solar cells have used silicon as the main semiconductor, because silicon is relatively abundant and stable, and its semiconductor properties naturally match the light spectrum of the sun.
But making large silicon crystals for use in solar panels is very expensive and labor intensive – hence the reason solar panels are so expensive.
Perovskites are the solution.
Perovskites are easily synthesized materials that can be handled relatively easily. Scientists recently discovered how to manipulate these easy-to-use perovskites to mimic the semiconductor properties of silicon.
This in itself is a huge deal, as it means perovskite solar cells are an inexpensive alternative to silicon solar cells.
But beyond that, researchers at the University of Oxford have found that if you handle these perovskites the right way, you can significantly increase the efficiency of these solar cells, too much.
Today’s silicon solar cells achieve a peak efficiency of around 22%. Add a little perovskite, however, and Oxford is testing solar cells that grow at 30% efficiency – and the research team expects that number to jump to 40% over time.
In other words, perovskites could be the key to unlocking a new generation of more efficient and cheaper solar panels, which could pave the way for mainstream adoption.
And last week, seven solar researchers from academic institutions around the world working on this highly perovskite technology received the prestigious 25e Rank price for optoelectronics.
So, don’t worry about solar stocks being weak in 2021. Use it to your advantage. Buy the drop and get huge returns in 2022 and beyond betting on the inevitable future of solar power.
As the rising tides lift all boats – and we believe most solar stocks will rise in 2022 – we see one solar stock in particular as a huge winner.
In fact, we are so confident in this title that it is the only solar title we have in our flagship investment research consultancy, Innovative investor – where we invest in the world’s most innovative companies, transformative megatrends and disruptive technologies.
It is a company that has built critical technology at the epicenter of the solar energy industry. This technology is unique, patented and powerful – and it is the key to making solar panels work well enough to be deployed around the world.
Ultimately, thanks to this revolutionary technology, this company could become the The biggest winner of Solar Energy Revolution.
To learn more about our top stocks to buy in the solar industry – and the best stocks to buy for huge long-term gains in the tech world – click here.