Solar stocks had a topsy-turvy 2020. Much like marijuana stocks, President Joe Biden’s victory was a tailwind for the industry. However, they did begin to lose strength earlier this year. Now, though, clean energy stocks are surging once again as Congress considers extending tax breaks for wind and solar energy.
Separately, Senator Jon Ossoff also recently introduced legislation to establish a tax credit for domestic solar manufacturers. Ossoff hopes this will pass as part of a larger infrastructure package later this year. The bill — which will provide tax credits for American manufacturers at every stage of solar manufacturing — aims to accelerate solar energy production and help close the gap between the U.S. and overseas competitors.
Plus, solar energy is becoming cheaper with each passing day. The technology is getting better and better, turning into a viable alternative to fossil fuels. How fast the shift to clean energy will happen is anyone’s guess, but it’s not surprising to see a bull run in these stocks.
- Enphase Energy (NASDAQ:ENPH)
- Sunrun (NASDAQ:RUN)
- SolarEdge (NASDAQ:SEDG)
- Brookfield Renewable Partners (NYSE:BEP)
- Invesco Solar ETF (NYSEARCA:TAN)
- Canadian Solar (NASDAQ:CSIQ)
- NextEra Energy (NYSE:NEE)
Solar Stocks to Buy: Enphase Energy (ENPH)
First up on this list of solar stocks, Enphase Energy provides energy management for homes. Their “software-driven” solutions include solar generation, energy storage and web-based monitoring and control.
The bulk of this name’s products focus on solar power. Based in California, the company manufactures the software needed to control and monitor residential panel systems. Over the years, Enphase has been able to capitalize on surging demand for clean energy, delivering average five-year top-line growth of around 23% as it chips away at its operating loss.
Although the bulk of Enphase’s revenue comes from the United States, the company is also expanding globally and bringing its product to different markets. ENPH stock has significantly outperformed the S&P 500 and its sector. Bears can definitely make the argument that this stock is trading a bit too hot right now. However, with the legislative moves of late, ENPH still has a lot to offer.
San Francisco-headquartered Sunrun manufactures residential solar panels and home batteries. The company offers solar services through leases and power-purchase agreements. As a result, Sunrun customers tend to have a long association with the company. Based in more than 175 cities in 22 states and Puerto Rico, Sunrun produces “more than three gigawatts of solar energy” globally and serves over 550,000 customers.
Several bullish catalysts will help drive RUN stock upward. These include favorable Biden administration policy measures, the potential to refinance existing systems on a large scale and the opportunity to upsell additional services to its growing pool of customers. Over the last year, Sunrun’s sales are up despite an earnings per share (EPS) loss. For the first quarter of 2021, revenue rose 59% year-over-year (YOY) to $334.8 million.
Sunrun suffered a lot due to the pandemic. Revenues fell as people paused their purchases and waited for the economy to get better. With the global investment landscape getting healthier, though, Sunrun is now one of the solar stocks that’s in a prime position to benefit.
Solar Stocks to Buy: SolarEdge (SEDG)
Next up on this list of solar stocks is SEDG stock. Headquartered in Israel, SolarEdge manufactures and installs solar inverters and other similar solutions for residential and commercial customers in both Europe and the United States.
This company is actually critical to the solar industry. Why? It makes crucial inverter and optimizer technology that helps solar panels work at their most efficient. SEDG is also pouring capital into energy storage, electric vehicle (EV) charging and grid-power solutions. Finally, SolarEdge also supplies electrical powertrain units and batteries. Recently, SEDG announced that it had been selected as the supplier of batteries and full electrical powertrain units for the upcoming Fiat E-Ducato (Fiat is owned by Stellantis (NYSE:STLA)).
Over the last five years, SolarEdge’s revenues have jumped at an average of nearly 39%. Of course, last year was disappointing for the company, since revenues stood relatively unchanged due to the pandemic. However, with things getting back to normal this year, SolarEdge should do very well as solar stocks ramp up speed.
Brookfield Renewable Partners (BEP)
Based in Toronto, Brookfield Renewable Partners is 60% owned by Brookfield Asset Management (NYSE:BAM), an alternative asset manager with over $600 billion in assets under management. Overall, the company operates multiple renewable energy facilities in North America, South America, Europe, India and China and generates electricity through wind, solar and other renewable sources.
Although the company has reasonably diversified affairs, its hydroelectric power business constitutes approximately 62% of its portfolio. Overall, BEP runs a tight ship.
Brookfield currently has trailing 12-month (TTM) revenue of $3.78 billion. The first quarter also continued its upward trend. In Q1, BEP generated funds from operations (FFO) of $242 million (or $0.38 per unit) — a 21% YOY increase. Additionally, the company inked “29 agreements for approximately 2,300 GWh of renewable generation” and added nearly 4,500 megawatts to its development pipeline.
In February, when the Texas winter storm devastated regional energy infrastructures, there was talk of BEP stock being negatively impacted. Fortunately, though, it did not have a material effect on the company’s financial results. Nevertheless, the crisis did take the shine off the stock somewhat. BEP stock is now only up 0.13% in the last three months, making it one of the more undervalued solar stocks to buy at the moment.
Solar Stocks to Buy: Invesco Solar ETF (TAN)
The next name on this list of solar stocks to buy is actually an exchange-traded fund (ETF).
Invesco Solar is one of Wall Street’s most popular solar-based funds. The beauty of purchasing this ETF is that you’re buying the entire basket of solar stocks. That can save you the trouble of researching every major solar company that’s out there on the market.
Today, TAN stock represents approximately $3.42 billion in assets under management according to Seeking Alpha. The ETF also tracks the MAC Global Solar Energy Index and is one of the oldest solar ETFs, making it the bellwether of this group. Currently, it has an expense ratio of 0.69% and an ROE of 9.31%.
Right now, TAN stock is trading at around $85. When it comes down to it, you are hedging your bets when investing in this one. As the industry goes up, so goes the fund.
Canadian Solar (CSIQ)
Canadian Solar is the next pick of the solar stocks on this list. The company manufactures solar photovoltaic (PV) modules and also runs large-scale solar projects.
Recently, CSIQ has faced a few headaches because of supply-chain issues associated with a surge in demand for solar energy. InvestorPlace contributor Ian Bezek has already touched on this subject — and the next steps that Canadian Solar is contemplating.
There is a silver lining, though. Currently, CSIQ stock is down 2% for the last three months. That makes now the ideal opportunity to load up on a name with excellent fundamentals. Yahoo! Finance estimates revenue growth of 69.7% and 10.3% in fiscal 2021 and 2022, respectively.
That should translate into some nice market moves for the stock as well.
Solar Stocks to Buy: NextEra Energy (NEE)
Last on this list of solar stocks, NextEra Energy is the largest electric utility holding company by market capitalization. NEE is a holding company for Florida Power & Light, Gulf Power and NextEra Energy Resources and others. Through its subsidiaries and various units, NEE generates renewable energy from wind and solar power. However, the company also owns substantial natural gas, energy storage and other assets. Plus, it’s geographically diversified across the continental United States.
Although NextEra had a rough 2020, things are looking on the up-and-up this year. On Jul. 23, the energy company reported a quarterly adjusted profit that surpassed forecasts. This was partly thanks to increased investments in new power infrastructure by its Florida utilities and energy development arm.
Currently, shares of NEE stock are up just 1.54% for the last three months. Like CSIQ then, now is an ideal opportunity to buy the stock at a discount as it continues to rise. Plus, the company has a diversified portfolio. So, you can rest easy that no single business segment will massively impact the overall business.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.