Solar stocks rallied for political reasons. Can it continue?

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Investors have embraced renewables this year.

Courtesy of Sunpower

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solar energy stocks

have soared this year as investors embraced renewables and positioned their portfolios for a possible shift in political power to the left. Today analysts are wondering if the performance of some of these stocks has been too extreme or if it is just beginning.

On Monday, two analysts came to different conclusions on a leading solar company, a manufacturer


First solar

(symbol: FSLR). Credit Suisse analyst Michael Weinstein downgraded First Solar to Underperform from Neutral, saying its valuation has become much more expensive than its historical average. The price appears to reflect very strong political support, including high tariffs on competitors, Weinstein wrote.

Earlier this month, President Donald Trump announced plans for higher-than-expected tariffs next year. First Solar has benefited from tariffs on foreign-made solar modules, but they are expected to be phased out by 2022. Weinstein thinks tariffs could be extended, but still doesn’t think First Solar’s shares are worth what they are negotiated. His target price is $ 64. First Solar fell 1.9% on Monday to $ 83.75.

Roth Capital Partners analyst Philip Shen, however, believes First Solar is in a strong position, raising the share to Buy from Neutral. “As third quarter results approach, we see the story around FSLR serving as the go-to company for customers seeking security of supply and reduced reliance on the Chinese supply chain take scale, ”he wrote.

The Chinese supply chain is vulnerable for several reasons. One is the potential for tariff extension on imported solar panels. And the other is a bill passed by the US House of Representatives that would block the importation of goods from China’s Xinjiang Province “until companies prove that forced labor has failed.” been used in the production of the goods, ”Shen wrote. This could impact solar companies in China.

Customers may want to avoid Chinese solar panels given the growing political risks, Shen notes. First Solar is the largest panel maker in the United States, so it would be in a good position to win if Chinese panels became less attractive to American buyers. First Solar is close to selling its 2021 production, and higher demand would help push prices up in 2022. Shen has a target price of $ 100 on the shares.

First Solar publishes its results on Tuesday after the market closes.

Instead of solar manufacturers, Weinstein prefers solar developers and installers, who can benefit from Biden’s plan to double the rate of solar panels installed in the United States. He loves developers


Sunrun

(CLASSES)


Azure Power

(AZRE) and


Sunnova

(NOVA), as well as a fuel cell company


Flowering energy

(BE) and utility company focused on renewable energies


NextEra Energy

(BORN). He downgraded the solar developer


Solar energy

(SPWR) to Neutral outperform on valuation, however.

Write to Avi Salzman at avi.salzman@barrons.com

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