Why Enphase Energy, SunPower and First Solar Stocks all shone in March


What happened

Shares of many alternative energy companies rose in March as investors tried to gauge the effects of rising oil prices and viewed the decline in stock prices in early 2022 as a buying opportunity. Stocks of solar energy companies Enphase Energy (ENPH 2.04% ), Sun Power (SPWR -0.33% )and First Solar (FSLR 0.32% ) all climbed during the month of March. The gains were 21%, 19.8% and 11.2% for Enphase, SunPower and First Solar respectively, according to data provided by S&P Global Market Intelligence.

So what

It wasn’t just the financial results of these companies that drove stocks higher in March. Although Enphase and SunPower reported strong fourth quarter and full year 2021 results, these reports were released in February. First Solar also reported strong fourth quarter 2021 results that improved significantly year over year.

But shares of First Solar fell after the March 1 release, when the company forecast a sharp drop in revenue and bottom line for 2022. This is partly because the company will see high start-up costs from manufacturing facilities in 2022 associated with growth investments. However, the stock still rewarded shareholders with a double-digit gain for the month as it benefited from tailwinds that buoyed the entire solar energy sector.

Image source: Getty Images.

Now what

Uncertainty surrounding global energy continued in March as the war in Ukraine continued. This helped keep oil prices above $100 a barrel for most of the month, including a peak above $120 a barrel. Higher fossil fuel prices generally drive more interest in alternative energy investments, including these solar companies. But it’s not just the current situation that’s driving up solar inventory; it’s the potential for increased solar generation capacity to help ensure long-term energy independence.

Business for solar companies was already growing before recent concerns about the future of energy supply. Enphase reported that its fourth quarter revenue increased 17% sequentially from its third quarter and climbed 56% from the fourth quarter of 2020.

The company announced increasing deployments of its solar and battery storage offerings, both domestically and internationally. Enphase also announced an acquisition last month that it plans to integrate into its operations to help accelerate the adoption of solar installations. Enphase can also afford to grow further through acquisitions, as it ended 2021 with $1 billion in cash. It also generated $97.2 million in operating cash flow in the fourth quarter, while spending just $13.2 million on capital expenditures.

Even with Enphase stock’s strong performance in March, it’s only up 12.5% ​​year-to-date due to lagging performance earlier in the year. Shares of SunPower are only 2.6% higher for the year, while shares of First Solar are down 3.6%. Investors who view solar power as a long-term investment moved to take advantage of early-year declines, pushing stocks higher last month.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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