In the wake of an apparent Democratic sweep in Georgia runoff that sets the stage for a “blue wave” – in which Democrats control the White House, Senate, and House of Representatives – solar stocks are rising. At the time of this writing, the Invesco Solar Portfolio ETF (NYSEARCA:BRONZER) is up more than 10% on the day.
It is not a false head. This is the start of a multi-year break in solar stocks.
Solar adoption was already in full swing before the 2020 election. Falling costs, improving technology, and changing consumer demand have forced homeowners and businesses to consider more seriously. the installation of solar panels. Now, important policy catalysts are also in the works, as a Democrat-controlled government will almost certainly make passing a major clean energy bill a priority in 2021. Huge solar subsidies are likely to be the focal point of this bill.
In other words, the solar market is primed for several years of hypergrowth to come.
In the midst of this era of hypergrowth, solar stocks will continue to rise – no pun intended.
With that in mind, let’s take a look at my three favorite solar stocks to buy for the Blue Wave Catalyst.
- SolarEdge (NASDAQ:SEDG)
- SunPower (NASDAQ:SPWR)
- Maxeon Solar (NASDAQ:MAXN)
Solar shares to buy: SolarEdge (SEDG)
One of my favorite solar stocks to buy for the next few years is SolarEdge, as this large solar company has clear visibility to become the ubiquitous technological backbone of the solar industry in the 2020s.
Here is the story.
Solar systems have three main parts: modules (which produce direct current when exposed to the sun), the inverter (which transforms direct current into alternating current that can be used by the electrical network), and associated wiring, fuse boxes and mounting hardware.
Traditional solar systems were built with central inverters, or an inverter that connected all the modules of a solar system. These systems suffer from a “weakest link” problem where, because all modules in the system are connected by the same inverter, the entire system tends to operate at the output power of the weakest module. of the system.
A revolutionary technology called power optimizers has been designed to solve this “weakest link” problem. Power optimizers are basically smart microchips placed on each module. They monitor, track and adjust (if necessary) the output power of each individual module. In doing so, power optimizers separate the system from the module and keep each module operating at its unique MPP, or maximum output power.
Power optimizers are the future technological backbone of solar. Almost all large-scale solar panels will be fitted with solar optimizers to improve performance.
SolarEdge sells these power optimizers, they have no rival in this space and their dominance is only growing. According to IHS Market, SolarEdge is the world’s leading supplier of solar inverters / optimizers in terms of revenue and power. Meanwhile, according to Wood Mackenzie, SolarEdge has increased its share of the U.S. residential solar inverter market from near zero in 2013 to over 60 percent in 2019, from the fifth player in space to the single largest player in one. thousand.
SolarEdge is expected to be able to combine first-mover advantage with industry-leading resources – the company has over $ 1 billion in cash on balance sheet, around 400 full-time employees, and more market capitalization. $ 10 billion – to support UPS / optimizer leadership for the foreseeable future.
If so, SolarEdge will also maintain huge revenue and profit growth over the next several years as solar power becomes mainstream, and SEDG stock will be one of the biggest winners in this industry.
Another of my favorite solar stocks to buy for the 2020s is SunPower.
At a high level, SunPower is a leading $ 4 billion downstream integrated solar energy distribution and storage in the United States and Canada that provides an end-to-end consumer solution that includes origination , financing, installation and service / maintenance of solar projects. via a connected software application.
In other words, the company does not manufacture solar panels and does not invest in upstream R&D. Instead, the company is content to sell, finance and install solar panels and the accompanying panel management software in the residential and commercial end markets.
The bull thesis on SPWR stocks comes down to one thing: SunPower is the unrivaled market leader in premium solar panels.
SunPower solar panels are widely recognized as the most efficient panels on the market, with an average efficiency of 19% to 23%. This is significantly higher than the industry average efficiency range of 14% to 18%. These panels also have the best temperature resistance on the market and a 25 year material warranty, the best on the market.
Of course, the panels are a bit more expensive than the norm. But not by much (about 15% more expensive), and customers say that the premium is worth it for higher quality panels and offset by the fact that SunPower offers a wide range of in-house financing solutions. This is why SunPower has one of the best Net Promoter Scores in the market at 69.
In other words, SunPower is today and plans to remain the dominant premium brand in the domestic solar industry.
This is an interesting position to occupy, as most companies are likely to turn to high-end solar panels (they can’t afford blackouts), which means SunPower could win plenty of corporate contracts. over the next few years, as increasing solar subsidies push companies to embrace solar.
As all of this occurs, the stock of SPWR is expected to rise higher.
Solar stocks: Maxeon Solar (MAXN)
Last on this list of top solar stocks to buy – but certainly not the least – is Maxeon Solar, a small solar technology company that makes the very high-quality solar panels that SunPower installs.
Maxeon is a whole new player in the solar world. The company was part of SunPower. Then, at the end of 2019, SunPower decided to separate its upstream manufacturing business (Maxeon) from its downstream installation business (SunPower), so that as the solar industry grows, matures and consolidates over the course of over the next few years, SunPower and Maxeon can each carve out a niche for themselves through value chain specialization.
So, today, Maxeon is a newcomer to the market that specializes in manufacturing the best solar panels in the world, which have the highest energy conversion efficiency in the market, the lowest degradation rate. the best durability and longest shelf life on the market.
From head to toe, the solar panels manufactured by Maxeon are the best solar panels the world can offer.
Maxeon has an exclusive agreement to sell these solar panels to SunPower in the United States and Canada over the next several years. But this exclusive deal ends with these two countries, which means that outside of North America, Maxeon has a huge “white space” opportunity to become the world’s leading manufacturer of premium solar panels, selling its best solar panels to several installers. across several continents.
This is why I consider Maxeon to be one of the best plays on the global solar energy megatrend.
So, as this solar power megatrend gains momentum in the early 2020s, MAXN’s stock is expected to be significantly more powerful.
At the time of publication, Luke Lango had (directly or indirectly) no position in any of the stocks mentioned in this article.
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