Solar stocks shine bright after Clean Energy Bill passes


There have been plenty of sunny days lately for the solar giant Enphase Energy (NASDAQ:ENPH), which recently recorded outsized earnings growth. Below is his feedback:

  • 1 month: +34.36%
  • 3 months: +93.22%
  • Year-to-date: +58.97%
  • 1 year: +56.73%

California-based Enphase designs, manufactures and sells home energy systems for the solar photovoltaic industry in the United States and around the world.

Get the complete Henry Singleton series in PDF

Get the complete 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email it to colleagues

Q2 2022 Hedge Fund Letters, Talks & More

Massif Capital’s best short bets in the real asset space [Exclisuve]

Screenshot 2022 08 10 18.57.51 1Since its creation by Will Thomson and Chip Russell in June 2016, the Massif Capital real assets strategy has outperformed all its real asset benchmarks. Since its creation, the Long/Short Equity fund has posted a net return of 9% per year, compared to 6% for the Bloomberg Commodity Index, 3% for the 3 MSCI USA Infrastructure index Read more

Find a qualified financial advisor

Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors who can help you achieve your financial goals, start now.

This is a stock with almost all the characteristics of a leader. For example, it went public in 2012, so in the 15-year post-IPO window when stocks are likely to post some of their biggest gains. Additionally, it has posted double- and triple-digit gains and revenue gains in each of the past seven quarters. The company has made profits in each of the past four years, and analysts expect earnings growth this year and next.

In late July, Enphase reported earnings of $0.69 per share, easily beating views of $0.54 per share. Revenue reached $530.20 million, well above expectations of $506.57 million. According to MarketBeat earnings dataEnphase has beaten both profit and revenue in every quarter since February 2019.


The optimism of the clean energy bill

Solar stocks as a group got a huge boost from the US Senate passing a bill that would funnel hundreds of billions of dollars into clean energy projects. For example, the iShares Global Clean Energy ETF (NYSEARCA: ICLN), of which Enphase is the largest holding, has recently been in rally mode, topping the S&P 500.

The ETF tracks an index comprised of global stocks in the clean energy sector, making it as good an indicator as any for the sub-industry as a whole.

The ETF’s recent returns are as follows:

  • 1 month: 13.01%
  • 3 months: 30.29%
  • Year-to-date: 7.46%

In addition to Enphase, heavily weighted solar holdings within this ETF include Solaredge Technologies (NASDAQ:SEDG) and First Solar (NASDAQ:FSLR).

solar edge, which is dedicated to designing, developing and selling solar PV systems worldwide, recently hit resistance just below its January 2021 high of $377. This relative inertia comes despite an increase in earnings growth in 2021, with stronger growth expected this year and next. However, part of the problem is a series of revenue and revenue shortfalls. Solaredge has missed analysts’ earnings expectations in three of the past four quarters.

Last quarter, the company reported earnings of $0.95 per share on revenue of $727.8 million. Analysts had asked SolarEdge to report net income of $0.88 per share on revenue of $731 million. After the recent shortfall, the stock lost 19%.

Nevertheless, Wall Street considers the stock a “moderate buy”. according to MarketBeat analyst data. The consensus price target is $358.79, which represents an upside of 10.83%. This doesn’t seem unachievable over the next 12-18 months, particularly if broad market rallies and/or solar stocks really benefit from a rising clean energy bill.


The first solar beats expectations

Meanwhile, First Solar is in strong rally mode, exploding over 45% last month and over 16% so far in August. Since reporting its results on July 28, First Solar is up 49%.

Among the highlights of the release:

  • Net sales of $621 million
  • Net earnings per share of $0.52
  • Earnings forecast lowered due to impairment of existing system assets in Chile, as well as devaluation of the Japanese yen

The company manufactures thin-film solar panels. While its results marked year-on-year declines, investors were encouraged by better-than-expected results.

Again, the clean energy bill inspires optimism about the company’s prospects. Since the adoption of the bill, four analysts either improved their rating on First Solar or raised the price target, according to data compiled by MarketBeat.

While it’s always tempting to jump on board a stock that’s staging a big rally, it’s important to understand that uptrends end or, more frequently, pause before resuming. Give yourself some system, be it a price target, stop loss, or moving average indicator, to gauge whether it’s time to buy, sell, or hold. Otherwise, you’re just guessing, even if a sector or industry is currently in favor, as we’re currently seeing with solar power.

First Solar

Article by Kate Stalter, market beat



Comments are closed.