Solar stocks are in the red today after a surprising Capitol Hill setback spurred a sector-wide downtrend. Sunrun (NASDAQ:RUN), SunPower (NASDAQ:SPWR) and First Solar (NASDAQ:FSLR) are down roughly 8%.
What has these sunny stocks looking cloudy today?
The Build Back Better Act hit a major roadblock after Sen. Joe Manchin said he did not support the social spending proposal. His decision effectively ended negotiations on the bill, at least until the new year.
Manchin’s office released a statement about his decision. He said:
“My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face. I cannot take that risk with a staggering debt of more than $29 trillion and inflation taxes that are real and harmful to every hard-working American at the gasoline pumps, grocery stores and utility bills with no end in sight.”
But how does this impact solar stocks? Importantly, the social spending bill would have boosted solar installations by 31% through 2026.
The legislation included a record $555 billion in climate change investments, including nearly $300 billion on green energy-related tax incentives. Manchin’s decision therefore is a big blow for many renewable energy companies.
Just How Bad is the BBB Rejection for Solar Stocks?
Manchin’s decision has spurred a selloff in solar stocks, adding to an already tumultuous year. After a huge spike in January, both Sunrun and SunPower have seen a steep drop off. SPWR hit a 52-week high of $57.52 on Jan. 29, but is back down to $19.80 today — and falling. RUN has a similar story: Shares hit a record-breaking $100.93 on Jan. 12. Today, they trade hands for $31.62.
Despite the gloom surrounding the industry today, there remains plenty for solar bulls to bet on. On Friday, the Solar Energy Industries Association revealed Q3 solar installations saw a 33% increase year over year, the largest Q3 on record. Additionally, residential solar installations in the U.S. exceeded 1 gigawatt (GWdc) of solar capacity and more than 130,000 systems in one quarter for the first time ever. Utility-scale solar saw a similarly record-breaking quarter.
Solar growth is a practical certainty, especially given President Joe Biden’s goal of 100% carbon pollution-free energy by 2030. That is in addition to the rapid demand for solar panels in places like California and Texas.
Regardless of short-term prospects, in the case of solar stocks, it’s always worth having an eye on the sky.
On the date of publication, Shrey Dua 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.
