Why solar stocks were crushed on Monday


What happened

Shares of solar stocks were beaten on Monday as the solar industry received bad news from the White House. Actions of Sunrun (NASDAQ: RUN) have fallen to 11.3%, SunPower (NASDAQ: SPWR) fell to 11.1%, and Canadian solar (NASDAQ: CSIQ) fell 11% to its low point. All three stocks were down 10.4%, 6.3% and 8.3%, respectively, as of 3:20 p.m. EDT.

Renewable energy stocks were down overall and as industry leaders, so it’s no surprise that Sunrun, SunPower and Canadian Solar were hit the hardest. Let’s see why renewables are on the decline today.

Image source: Getty Images.

So what

The biggest news is that the White House issued a proclamation over the weekend stating that tariffs would be applied on imports of previously exempted bifacial solar panels, and that tariffs on imports would drop by 15% next year. at 18%. The tariff percentage increase and the end of the bifacial exemption are aimed at increasing the profitability of solar panels produced in the United States. In reality, very few solar panels are produced in the United States, so the real impact increases costs for solar installers.

For Sunrun, the extra cost could reduce its margins just after the Vivint Solar acquisition closed last week. On the flip side, manufacturers such as Canadian Solar could see demand from US developers decline due to tariffs. SunPower is a bit of a mixed bag, with tariff exemption on some of its solar imports and standard tariffs on others.

At the same time as tariffs appear to be rising, stimulus talks that were a potential boon to renewable energy developers appear to be collapsing. The White House and Congress don’t appear to be close to a deal, and with the election just weeks away, time is running out.

Now what

Both of these pieces of news may sound bad, but let’s put the day in context. The tariffs initially implemented in early 2017 have had very little impact on the pace of solar installations in the United States, as you can see in the following graph. Some companies felt a financial impact, but that was because the tariffs went from 0% to 30%, so a small increase of 3 percentage points is not significant.

Solar Energy Consumption Table in the United States

Solar energy consumption in the United States given by YCharts

The other background to keep in mind is that solar stocks have had an amazingly good month, so a bearish day is not surprising. You can see here that these three stocks have risen in double digits over the past month, even after today’s decline:

RUN graph

CLASSES given by YCharts

Given the steady volatility of solar stocks and how little impact the proposed policy changes will have on the industry, I would not be alarmed by today’s decision. The solar industry still has a bright future, and even a hostile White House has proven it cannot change the course of the industry.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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