With Democrats controlling both houses of Congress and the White House, conventional wisdom has held that 2021 should have been a banner year for renewable energy stocks.
However, much of that effervescence was incorporated into these names before the start of the year, and the group is floundering in 2021. For example, theInvesco Solar ETF (TAN), the largest solar equity-focused exchange-traded fund, is down 24.78% year-to-date.
Some market watchers believe that the repudiation of solar stocks this year is too severe and that some components of the TAN still offer great long-term potential. For example, analysts at BMO Capital Markets led by Ameet Thakkar said the recent sluggishness among solar stocks is a buying opportunity.
“Global investment in clean energy represents a multi-billion dollar effort over decades that will drive the long-term growth of many companies leading the carbon transition in future economic cycles,” the team said. BMO in a recent note to clients.
The research firm says solar stocks could experience some headwinds in the next few quarters, but adds that a “history of centuries-old growth spanning decades” is underway. Importantly for investors considering a position in TAN, BMO is bullish on several of the ETF’s reputable stocks, including SolarEdge Technologies Inc. (NASDAQ: SEDG) and Enphase Energy (NASDAQ: ENPH).
“Enphase makes a specialized inverter known as a microinverter, and this technological advantage prepares the stock for long-term gains,” Pippa Stevens reports for CNBC. “BMO has a target of $ 200 on the name, or 29% above the stock close on Friday. The company highlighted “significant earnings growth,” which it sets at a compound annual growth rate of 30% from 2020 to 2025 thanks to more solar systems, an increase in revenue per customer as batteries and vehicles are integrated, and expanding into commercial and international markets. “
Regarding SolarEdge, BMO says the company’s primary inverter product is increasingly important in a rapidly growing segment of the solar market. SolarEdge and Enphase combine for 20.67% of TAN’s list. The research firm is also excited about Sunrun (RUN) and Sunnova Energy International Inc. (NOVA). Sunrun is the world’s largest supplier of residential solar systems.
“NOVA provides exposure to the growing US residential solar market, driven by government policy goals, electric vehicle adoption and demand for energy storage,” notes BMO.
These two stocks are TAN’s top 10 holdings and combine for about 9.7% the weight of the ETF.
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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not come to fruition. The information on this site should not be used or interpreted as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.