As we wrap up another week of equity market volatility, there are many things investors need to consider. Despite mounting sanctions against Moscow, Russia’s attack on Ukraine continues. And because of this conflict, investors are on the edge of their seat. It’s no secret that oil prices and global stock markets swung wildly after Russia launched an invasion of Ukraine. At one point, we saw oil prices climb to $105 a barrel and natural gas futures soared over 50%.
With the shock waves in the energy markets, investors might consider some of the top energy stocks to buy in the market. After all, Russia is the second largest producer of natural gas and the third largest oil producer in the world. As such, it would be nearly impossible for any country to significantly substitute Russia’s natural gas supply to Europe in a short period of time. Following this disruption, it is understandable that energy stocks have been among the hottest trades this week.
Solar stocks for your March 2022 watchlist
Daqo New Energy (DQ)
Daqo is a China-based company that provides polysilicon products to the solar energy industry. The company is enjoying strong growth, but the company’s share price has been weighed down by uncertainty in China. The company grew EPS and sales by 74.9% and 59.7% annually over the past three years, respectively. That’s roughly in line with the EPS growth analysts expect over the next five years — 74.9%, according to Yahoo Finance.
Analysts’ average price target for the stock is $84.52, more than double the current price of $40.53 as of Jan. 21. That said, the stock price has fallen from over $120 to under $45 since the start of 2021. This created a potentially attractive P/E of 4.6 and a forward P/E of 3, 5.
There is a risk that China will continue to crack down on companies. This could mean that the EPS predictions may not materialize or the current EPS may drop.
Daqo exceeds industry averages in most financial metrics, including margin, return on assets, and return on invested capital. It has a solid cash position with minimal debt. The number of funds holding the stock increased significantly from 2019 to 2021 and only slightly decreased as the stock fell.
Generac Holdings (GNRC)
The share price of Generac Holdings (NYSE: GNRC), a company that manufactures standby power generation products for the residential, light commercial and industrial markets. It is up almost 7% over the past week and around 4% over the past month.
This compares to the S&P 500 which remains down about 3% over the past month. The recent gains follow the company’s stronger-than-expected fourth-quarter 2021 results, which saw revenue rise 40% year-over-year to around $1.07 billion, and adjusted EPS is $2.51. The demand for generators has increased due to multiple extreme weather incidents and power outages over the past year and also due to the shelter-at-home trend thanks to Covid.
Additionally, the company’s outlook for 2022 is also strong, with sales expected to increase 32% to 36% year-on-year as the company benefits from increased production capacity at its residential activity, growth in commercial and industrial product sales and demand from clean energy markets.
However, now that GNRC stock is up 7% in a week and around 4% in the past month, will it continue its upward trajectory, or is a fall imminent? Based on historical performance, there are a greater chance of a rise in GNRC shares over the next month.
SolarEdge Technologies (SEDG)
SolarEdge Technologies (NASDAQ: SEDG) manufactures power optimizers and inverters used to convert solar energy into usable electricity. These components have improved the way solar panels convert direct current produced by the sun into alternating current used by the power grid. A system that uses SolarEdge’s power optimizers will cost less than a system that, for example, uses a microinverter built by a company such as Enphase Energy (NASDAQ: ENPH) and with minimal loss of efficiency.
SolarEdge’s focus on manufacturing low-cost power optimizers has helped it gain market share over competitors as solar project developers focus on cost. The company also invested money to acquire and develop new products in energy storage and management spaces, as well as smart modules to help increase its average revenue per installation.
The company complements its market-leading position with a strong, cash-rich balance sheet. This gives it the financial flexibility to invest in expanding its manufacturing capacity and technological edge over its competitors.
It also gave SolarEdge the flexibility to expand into other segments of the energy market, including storage, electric vehicle (EV) charging, batteries, uninterruptible power supplies (UPS) , EV powertrains and network service solutions. These factors have enabled SolarEdge to successfully execute its plan to expand its reach into the rapidly growing clean energy sector.
JinkoSolar Holding Co. Ltd. (JKS)
Due to a more risk averse attitude on Wall Street right now, investors are selling renewable energy companies even though they are growing fast relative to fossil fuels. This leads to the undervaluation of solar stocks like JinkoSolar, says Garvin Jabusch, chief investment officer at Green Alpha Advisors.
“That, combined with Chinese political risk, has left this world leader very clear…more than dramatically undervalued,” Jabusch said. Despite strong growth in sales and gross margins, a valuation that compares the share price to annual sales means many market participants are pricing the company with numbers “normally reserved for companies that are in imminent danger of bankruptcy. and radiation,” he said.
“More risk has been priced in than actually exists, resulting in asymmetric upside potential for people willing to buy at this time.”
Enphase Energy (ENPH)
Enphase Energy (ENPH) is expected to generate higher year-over-year earnings on higher revenue when it reports results for the quarter ending December 2021. This widely known consensus outlook gives a good sense of the picture of business profits. But how actual results compare to those estimates is a powerful factor that could impact its stock price in the near term.
The stock could rise if these key numbers exceed expectations in the next earnings report, which is due out on Feb. 8. On the other hand, if they fail, the stock could go down.
While the sustainability of the immediate price change and future earnings expectations will mostly depend on management’s discussion of trading conditions during the earnings call. It’s worth handicapping the probability of a positive EPS surprise.
Unmanaged shares fell on Friday, following its fourth-quarter earnings report that topped earnings estimates but fell short of earnings as omicron issues took their toll. RUN stock fell on the news.
Late Thursday, sunrun (RUN) posted an adjusted loss of 19 cents per share on revenue of $435.2 million. Analysts had expected Sunrun to post an adjusted loss of 10 cents on revenue of $409 million, according to FactSet. Revenue jumped 36% from the prior year period.
RUN stock plunged 6.8% to close at 21.56 trading today, near a 17-month low.
In the fourth quarter, “Omicron-related labor shortages and higher fulfillment costs impacted $13 million,” Needham analyst Vikram Bagri wrote in a note to clients. “Additionally, the limited supply of batteries impacted the product mix, resulting in an $18 million impact on total value.”
However, Bagri said, “Taking these issues into account, the results would have been significantly better than our estimates. Orders and customer demand remain strong, as evidenced by a 57% year-over-year growth in backlog, which will be captured in 2022.”
The company says it can offer solar power to households with little or no upfront cost for those who rent their systems and offers a saving compared to traditional electricity. For tenants, it designs, installs, finances, insures, monitors and maintains the systems. It also sells systems to those who want to buy.