The most recent earnings salvo from solar stocks hasn’t exactly been full of sunshine. The sector has been full of earnings misses, one-off issues and downbeat guidance for the rest of 2014.
Broad solar stocks vehicles — like the Guggenheim Solar ETF (TAN) — have fallen pretty hard during the past month. But that makes the sector an interesting long-term bargain right now.
The cost of solar energy continues to drop and is increasingly more affordable — even before taking tax incentives into account. Analysts now believe that rooftop solar installations will become competitive with conventional electricity from the grid within the next three years. Let’s not forget that worldwide solar demand is expected to jump 29% this year and an additional 18% in 2015.
All in all, that’s a huge win for the solar stocks that build panels, as well as the firms that build out these installations. And that’s why long-term investors should consider adding solar stocks — such as these four — to their portfolios:
Solar Stocks to Buy – SunPower (SPWR)
For investors looking to add some solar muscle, SunPower’s (SPWR) recent earnings whiff could a be great chance to load up on shares.
Despite beating analyst expectations for earnings, SPWR stock sank pretty hard on lousy guidance for the rest of the year. SunPower expects to earn between $1.10 and $1.40 per share for the full year — lower than previously forecast, and disappointing to analysts, who were looking for $1.30 per share on the low end.
SPWR has recovered since then, but the dip did halt a pretty big head of steam the stock had built up year-to-date.
The long-term picture looks great for SunPower. Global demand for its high-efficiency solar panels are rising, and SPWR expects to ship around 1.2 to 1.3 gigawatts worth of panels this year. Helping boost that demand is its pilot program in Australia to provide rooftop solar installations to homeowners and businesses, as well as its growing backlog and pipeline of pending utility-scale projects. To that end, SunPower recently announced that it plans on building a new factory that will eventually produce 700 megawatts of solar panels per year to meet with demand.
All of this rising demand should ultimately boost SunPower’s bottom line.
Solar Stocks to Buy – Trina Solar (TSL)
Like other solar stocks, Chinese firm Trina Solar (TSL) is dealing with a case of investor shortsightedness.
When Trina reported earnings this week, TSL announced that it shipped a total of 943.3 MW worth of solar panels in the second quarter. That amount was below both its own and analyst forecasts of between 950 MW and 1.01 GW. Likewise, revenues for TSL’s latest quarter came in below analyst expectations. Needless to say, TSL stock tanked more than 9% on the news.
Yet, Wall Street might be a bit too focused on the negatives rather than the positives, which are numerous.
First, that 943 MW TSL shipped during the quarter was 69% better year-over-year, and about 400 MW higher than what it shipped during Q1 of this year. And despite missing guidance, the king of Chinese solar stocks reiterated its projections of 3.6 to 3.8 GW worth of PV modules shipped for all of 2014.
Perhaps most importantly, Trina was able to overcome a major problem facing a lot of solar stocks — namely, profitability. TSL managed to report earnings of 14 cents per share for the quarter vs. a 47-cent loss in the year-ago quarter.
TSL could be a great (albeit volatile) solar stock to buy given its continued turnaround.
Solar Stocks to Buy – SunEdison (SUNE)
If you’re looking for solar stocks that are making all the right moves, look no further than SunEdison (SUNE).
After spinning out its regular semiconductor business as SunEdison Semiconductor (SEMI), SUNE then made the smart decision to spin off several of its utility-scale solar projects as a “yieldco.” TerraForm Power (TERP) allowed SunEdison to raise some cash for future projects as well as continue to be a source of hefty cash dividends for the future.
But investors don’t have to wait long. SUNE is already rocking ahead.
During the second quarter — which saw both of these spinoffs take flight — SUNE reported a surprise profit of 12 cents per share vs. an expected loss of 28 cents. In addition to reversing a year-ago loss, SUNE reported upbeat guidance as the solar stock completed more utility-scale projects during the quarter than it had originally estimated. That led SunEdison to increase in its full-year guidance on projects installed.
As if that wasn’t enough, SUNE discussed the possibility of spinning off more of its assets in TERP or creating other yieldcos to help fund its growth.
When it comes to solar stocks, SUNE seems to positioning itself perfectly to soak up the rays.
Solar Stocks to Buy – First Solar (FSLR)
OK. To say that First Solar (FSLR) choked on its latest earnings report would be an understatement. The king of American solar stocks managed to miss analyst expectations by a mile. All in all, FSLR reported earnings of just 4 cents per share and revenue of $544.4 million, while analysts were looking for 33 cents per share on $800 million in sales.
The culprit for FSLR was project delays.
As we’ve stated before, First Solar’s new bread ‘n’ butter is building out large, grid-scale solar arrays for utilities. That has been the main driver of FSLR’s great earnings over the last few quarters.
Well, it can be a source of pain, too. This quarter, First Solar was met by a series of delays in revenue recognition from its massive Campo Verde project, as well as a few other ventures. This caused the huge miss and FSLR stock to sell off hard.
The thing is, First Solar will be able to recognize that revenue by the end of the year — it’s not permanently lost. In fact, on the earnings call, FSLR reiterated that it remains on track to hit its financial targets for the year and full-year 2014 earnings guidance.
While FSLR stock has bounced back since reporting, shares still are a few percentage points off this year’s highs, and remain in a longer-term uptrend that should continue when it actually reaps the revenues and earnings from the stalled projects.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.