Solar stocks, for the most part, ended 2021 on a weak note. Many investors decided to take money off the table following significant gains seen in alternative energy names. For instance, the Dow Jones U.S. Renewable Energy Equipment Total Stock Market Index was down 24.0% in 2021.
Yet, despite the volatility in shares prices of solar stocks, the adoption of this alternative energy source is gaining popularity. According to a report by the Solar Energy Industries Association (SEIA), solar installations in third quarter surged by 33% year-over-year (YOY), the best Q3 on record. At present, “One out of every 600 US homeowners is now installing solar each quarter.”
Nonetheless, the outlook for 2022 has been lowered due to supply-chain constraints as well as global price increases. Moreover, the U.S. solar sector has recently come under pressure. First, the U.S. Commerce Department declined to investigate allegations of an unfair Chinese dumping.
In addition, “A U.S. judge overseeing trade issues on Tuesday overturned a decision by then-President Donald Trump to allow a re-imposition of tariffs on some imported solar panels. The decision … is a defeat for some domestic manufacturers.”
Finally, Wall Street is debating whether President Joe Biden’s Build Back Better plan can still be resuscitated. InvestorPlace.com readers might remember that Senator Joe Manchin refused to support the social spending plan. The bill includes $300 billion on clean energy-related tax incentives, and could enable solar installations to grow by 31% through 2026.
Regardless of short-term challenges, renewable energy stocks should appeal to readers who want to invest for sunny days ahead. With that information here are three solar stocks that could gain traction in 2022:
Solar Stocks: First Solar (FSLR)
52-week range: $67.71 – $123.13
First Solar provides photovoltaic (PV) panels and modules, and is particularly known for its thin-film technology. The Arizona-based company has production lines in Ohio, India, Vietnam, and Malaysia. Wall Street has been keen on the manufacturing expansion, especially in India.
First Solar reported Q3 results in early November. Revenue of $584 million implied a decline of 37% YOY. Net income came in at $45 million, or 42 cents per diluted share, down from $155 million, or $1.45 per diluted share in the year-ago quarter. Cash and equivalents ended the quarter at $1.9 billion. Free cash flow stood at $140.7 million, up $39.1 million from the prior-year period.
“Commercially, we had a good quarter, increasing our record year-to-date bookings to 10.5 GWdc,” cited CEO Mark Widmar on the results.
Management has recently signed multi-year contracts with Lightsource bp and the energy giant BP (NYSE:BP) for its thin-film PV solar modules. In addition, the U.S. International Development Finance Corporation (DFC) has approved a $500 million loan for the next-generation panel-manufacturing plant in India.
FSLR stock currently trades at around $84, shy from its multi-year high of $123.12 hit on Nov. 1. Over the past year, the stock is down about 12%. Yet, the 12-month median price forecast for First Solar is $115.
Shares trade at about 22.92 times trailing sales. Long-term investors who can tolerate some choppiness could consider investing around $85.
Sunnova Energy International (NOVA)
52-week range: $22.07– $55.55
Headquartered in Houston, Texas, Sunnova is a residential solar and energy storage service provider stateside. In late November, management announced a partnership with ChargePoint (NYSE:CHPT), which provides electric vehicle (EV) charging equipment. When a customer makes a purchase, they will have one installation for EV charging and solar power.
Management issued Q3 metrics in late October. The topline increased 37.3% YOY to $68.9 billion. Net loss of $25.9 million translated into a loss of 25 cents per diluted share. In the prior-year quarter net loss and loss per share were $73.3 million and 73 cents, respectively. The company ended the quarter with $951 million of cash and available liquidity.
Following the announcement, CEO William J. Berger remarked, “Our vision is to be a wireless power provider and it is our goal to electrify the home for our customers so that they have the freedom to live life uninterrupted.”
Looking ahead, management gave its 2022 outlook which included customer additions of 83,000 – 87,000 and revenue of $134 million – $154 million.
Sunnova stock hit a record high about a year ago on Jan. 7, 2021. It currently is around $23.91, down over 44% year-to-date (YTD). Trailing price-to-sales (P/S) ratio stands at 13.63x, and the 12-month median price forecast for NOVA shares is $56.
Analysts concur that the steady growth of solar power is almost unstoppable, especially given President Joe Biden’s 2030 carbon-free power goal. Interested investors might consider keeping NOVA stock on their radar to buy the dips.
Solar Stocks: SunPower (SPWR)
52-week range: $18.55– $57.52
California-based SunPower provides fully integrated solar, storage, and home energy solutions in North America. Despite supply-chain disruptions and competitive headwinds in the sector, management is taking steps toward solid growth. For example, the recent acquisition of Blue Raven Solar, has enabled the company to expand into Northwest and Mid-Atlantic regions.
Additionally, with the launch of SunPower Financial, the group now offers various financial products to make it easier and potentially more affordable to have residential solar installations. SunPower’s Q3 financial results released in early November showed strong growth in residential demand with record lead generation.
Revenue improved by 17.8% YOY to hit $323.6 million. Non-GAAP net income came in at $9.8 million, or 6 cents per diluted share. A year ago, non-GAAP net loss was $6.5 million and 4 cents loss per diluted share. The company ended the quarter with cash of $268.6 million, down $56.1 million YOY.
On the metrics, CEO Peter Faricy stated, “The time is now for homeowners to adopt solar energy and storage, with flexible financing options and favorable clean energy incentives currently under consideration by Congress that make it easier for consumers to help fight against the increasing impact of climate change.”
But the California Public Utilities Commission recently proposed slashing incentives granted for the excess power from the rooftop solar panels into the grid. If accepted, these changes could mean headwinds for the company.
SPWR stock currently hovers shy of $20, about 64% below its late-January 2021 highs and down 18.6% in the past 52 weeks. Shares are trading at 13.07 times trailing sales. The 12-month median price forecast for SunPower is $27. Interested investors could consider buying around these levels.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
