Solar stocks have been on fire lately (pun intended). The sector is getting a boost from the Biden administration which announced an overall goal for 45% of the country’s energy supply to come from solar power by 2050. That’s up from the 4% supplied by the sector in 2020.
And as one of many steps toward that goal, the sector got an additional catalyst in June when the Biden administration announced it was suspending tariffs on solar panel components from four countries.
Think of it like a lock and key. The lock is the 45% target goal. Suspending tariffs is one of the keys the administration is using to help break through supply chain bottlenecks.
However, the new tariffs are only accelerating a trend that has been building for years. Several research companies agree that the solar market will grow at a compound annual growth rate (CAGR) of over 20% over the next five years. And Fortune Business Insights estimates that the global market will be worth $1 trillion by the end of 2028.
Many companies should take advantage of this trend. This article highlights three stocks that seek to cash in on the solar rush.
An industry leader with more in-store growth
Sunrun (NASDAQ: RUN) has one of the largest installed bases in the United States. The company is known for its solar storage and home battery solutions, including solar panels, racks and solar cables. The San Francisco-based company has more than 600,000 customers in 22 states.
Unlike the other two stocks on this list, Sunrun shares are flat in 2022. This puts FUN stock well below current analyst expectations of $48 per share. But you can’t blame that on earnings. Sunrun is posting strong sequential and year-over-year revenue growth. And with CAGR projections for the industry, it shouldn’t slow down.
The issue may be more earnings. Sunrun still does not generate consistently positive profits. However, in the last quarter, it posted a solid 70% gain on earnings to minus 6 cents per share, versus minus 20 cents per share expected.
This major US manufacturer expects strong revenue growth
First Solar (NASDAQ:FSLR) will be one of the solar companies to benefit the most from the Biden administration’s Cut Inflation Act. Specifically, the bill provides $40 million in assistance to solar panel manufacturers. First Solar is a US-based company that already has an operational manufacturing infrastructure.
The company produces solar power systems and modules and is known for its proprietary thin-film module. This allows for better performance in low light and hot weather. In addition, the modules are larger than other modules, which helps reduce the cost per watt.
First Solar plans to increase its manufacturing footprint with the help of the money it receives from this legislation. And the company has a large backlog through 2024.
However, some investors may wonder if it is too late to participate in the recovery. FSLR’s stock is already up 49% for the year, with all the gains coming after the tariff suspensions were announced. This causes the shares to trade above the consensus price targets of analysts followed by market beat. But with sales expected to increase by an average of 27% over the next two years, it’s likely the title has even more potential ahead, especially knowing that it doesn’t rely on silicon from China in its operations. Manufacturing.
Compelling partnership adds juice to this business
The last stock in this short list of solar stocks is Sun Power Corporation (NASDAQ: SPWR). This is another American company that provides solar, storage and home energy solutions. And while it has commercial customers, it’s the company’s appeal to residential consumers that caught my attention.
Specifically, SunPower has a collaboration with IKEA with the aim of making solar energy more accessible to consumers. The partnership will begin in select California markets this fall.
SPWR stock is up 26% this year and above the current price target of analysts followed by market beat. However, analysts raised their price targets after the company reported revenue 60% higher than a year earlier. The company also cites a large backlog for its products which adds credibility to future revenue and profit growth.