It’s an interesting day in the stock market on Wednesday. While the Federal Reserve’s interest-rate decision has just been announced, stocks are rallying from the event. That goes for a whole host of stocks, including solar stocks.
Many names in this group are doing well, including First Solar (NASDAQ:FSLR), Sunrun (NASDAQ:RUN), Solaredge Technologies (NASDAQ:SEDG) and Canadian Solar (NASDAQ:CSIQ). All of these names are up at least 4% at the time of writing. However, there’s a clear leader of the day: Enphase Energy (NASDAQ:ENPH).
Enphase is leading solar stocks higher after the company reported better-than-expected earnings. Yesterday after close, the company soared past earnings estimates and beat on revenue expectations. Sales grew more than 67% year-over-year, while guidance for the third quarter came in well ahead of estimates.
Management expects Q3 sales of $590 million to $630 million versus expectations of roughly $550 million. All of these observations are acting as a catalyst to drive solar stocks higher.
What Else Can Drive Solar Stocks Higher?
The Invesco Solar ETF (NYSEARCA:TAN) is getting a rise too, up more than 5% on the day. Investors may note that the TAN exchange-traded fund (ETF) did not make new lows in June or July, unlike the major indices. That bodes well for these stocks, particularly as they continue to push higher for the second straight week.
Earnings are certainly a big bullish catalyst, particularly if other companies can follow suit. However, Washington could benefit this group too.
One of the Department of Housing and Urban Development’s initiatives includes enabling “people in government-assisted housing to access solar energy.” According to a fact sheet from the White House, this could enable “as many as 4.5 million families to get access to solar energy.”
It’s clear that President Joe Biden’s administration wants to go green, and solar fits into those plans. The administration wants to push a pilot program as well, spanning five states and Washington, D.C.
Spanning Colorado, Illinois, New Jersey, New Mexico, New York and D.C., the Department of Energy “estimated participants in the five initial pilot project states and the District of Columbia alone would save more than $1 billion on their energy bills annually.”
Will that be enough to spur solar stocks higher? Maybe not in the short term, but it can act as an intermediate- to long-term catalyst. And if the industry’s earnings are anything like Enphase’s, that may be enough of a catalyst in the short term for the bulls.
On the date of publication, Bret Kenwell 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.