Solar stocks are on fire.
No pun intended.
Year-to-date, the Invesco Solar ETF (NYSEARCA:TAN) is up a jaw-dropping 145% …
To put that in perspective, the absolute best year the S&P 500 has had in the past 45 years was in 1995, when the index rose 34%.
In other words, solar stocks in 2020 are performing four times better than the stock market ever has in the past five decades…
And it’s not a head-fake. The big 2020 breakout in solar stocks is a sign of the times.
Times where solar is now the cheapest energy source in the world, according to the IEA…
Where more than 200 cities and countries across the globe have a “100% clean energy” target for 2030, 2040, or 2050…
Where more than half of U.S. homeowners are considering adding solar panels to their homes…
Where solar is capable of not just fully powering homes, but also fully powering large-scale commercial properties and corporate campuses…
It’s a new world.
And in this new world, solar is king. Not coal. Not natural gas. Solar.
It’s a once-in-a-lifetime disruption… with huge global implications… and the time to invest is now.
Today, we will show you a strong way to play this solar megatrend – not by buying another small-cap hypergrowth solar stock, but rather by buying an already large solar stock that has the potential to be absolutely enormous one day.
Pioneering a Solar Technology Breakthrough with Game-Changing Implications
One of the largest and most well-known solar companies in the world is SolarEdge (NASDAQ:SEDG).
One may assume that – given the company’s $14.1 billion market cap – the big run in SolarEdge stock has already happened.
But that’s the wrong assumption to make.
Instead of a small solar company that could one day be big, SolarEdge is a big solar company that could one day be huge – and, in that light, SolarEdge stock offers you just as much upside as some of the smaller names in this space.
Here’s the story.
Solar systems have three main parts: the modules (which produce DC power when exposed to sunlight), the inverter (which turns DC power into AC power that can be used by the electricity grid), and associated cabling, fuse boxes and mounting hardware.
Traditional solar systems were built with central inverters, or one inverter that connected all the modules in a solar system.
These systems suffer from a “weakest link” problem where – because all the modules in the system are connected by the same inverter – the whole system tends to operate at the power output of the weakest module in the system.
A breakthrough technology called power optimizers were made to fix this “weakest link” problem.
Power optimizers are basically intelligent electronic chips placed on each module, separately, to monitor, track, and adjust (where necessary) the power output of each individual module. In so doing, power optimizers separate the system from the module, and keep each module running at its unique MPP, or maximum power output.
Power optimizers are the future technology backbone of solar. Almost every solar panel at scale will be outfitted with solar optimizers to improve performance.
Who sells those power optimizers?
According to IHS Markit, SolarEdge is the top solar inverter/optimizer supplier in the world, based on revenues and wattage.
The company’s dominance isn’t slipping. According to Wood Mackenzie, SolarEdge has grown its share of the U.S. Residential Solar Inverter Market from near-zero in 2013, to over 60% in 2019 – going from the fifth-largest player in the space, to the single-largest player by a mile.
Because SolarEdge has the best microinverter and power optimizer technology in the game, and is setting the gold standard for solar panel performance across the U.S.
SolarEdge should be able to couple its first-mover’s advantage with market-leading resources – the company has over $1 billion in cash on the balance sheet, about 400 full-time employees, and a $10+ billion market-cap – to sustain its technology advantage for the foreseeable future.
If so, then SolarEdge has visibility to becoming the ubiquitous technology backbone for the solar industry, with SolarEdge inverters and optimizers being installed in most solar panels in the world.
That, of course, means that as solar takes over the energy market in the 2020s, SolarEdge will turn into a titan of the multi-trillion-dollar global energy industry.
The current titans of industry (electric utility companies) feature $70+ billion market caps.
SolarEdge could very easily get there one day…
Which means that despite its $10+ billion valuation, SolarEdge stock is worth a look as a potentially huge long-term winner in the solar revolution.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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