Back in 2020, the International Energy Agency confirmed that the world’s best solar power schemes offer the “cheapest…electricity in history.” Given this observation, the IEA will increase the outlook for solar output globally by 2040. I believe that the cost factor is a reason big enough to be bullish on some of the best long-term solar stocks.
Another recent report indicates that wind and solar will produce over a third of global power by 2030. Further, solar PV’s installed power capacity is likely to surpass that of coal by 2027. The objective of these data is to establish the point that solar stocks will deliver multi-bagger returns in the coming years. Robust growth is likely beyond the decade and top solar powerhouses will be massive value creators.
The focus of this column is on three of the best long-term solar stocks to buy and hold. Let’s discuss the reasons to be bullish on these names.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) looks massively undervalued at a forward price-earnings ratio of 5.5. The markets might be concerned about the near-term growth outlook and this provides a good entry opportunity.
For Q1 2023, Canadian Solar reported revenue of $1.7 billion. On a year-on-year basis, revenue increased by 36%. It’s worth noting that last year, the company’s solar module shipment was 21.1GW. The company has guided for shipment of 30GW to 35GW for the current year. Therefore, the outlook is optimistic.
It remains to be seen if the backlog growth is robust. I am bullish on that front considering the point that global PV installations are expected to increase at a CAGR of 14% through 2027. Canadian Solar expects to increase its market share from 10% in 2023 to 15% in the next five years. I also believe that potential margin expansion during this period will be a key upside catalyst for CSIQ stock.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) has trended higher by almost 25% for the year to date. I remain positive on the stock and the decline from 2023 highs of $231 is a good opportunity to accumulate.
First Solar has been reporting healthy growth. For Q2 2023, the company reported net sales of $811 million, which was 30% higher on a year-on-year basis. Further, the balance sheet is impressive with a net cash balance of $1.5 billion. This provides ample flexibility to pursue aggressive expansion. This makes it one of the best long-term solar stocks.
First Solar has been investing in manufacturing capacity in Ohio, India, and Alabama. The recent investment of $1.1 billion in its fifth American manufacturing facility would help in boosting overall capacity to 14GW by 2026.
It’s worth noting that First Solar reported 77.8GW in backlog through 2030. Further, the company has potential booking opportunities of 78.3GW. As the order book swells, the company’s revenue and cash flow visibility will increase.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) has been in a correction mode with a downside of 53% in the last 12 months. I believe that the stock can be gradually accumulated over the next few quarters. When the reversal comes, ENPH stock will create significant value.
As an overview, the company is a supplier of microinverter-based solar-plus-storage systems. The company has already shipped 68 million microinverters globally. For Q2 2023, the company reported revenue of $711 million and a gross margin of 45.5%.
An important point to note is that Enphase reported a free cash flow of $225.2 million for the quarter. The company is on track to deliver annual FCF in excess of $1 billion in 2024. This will provide Enphase with high financial flexibility for growth and investment in innovation.
The launch of new products and global presence will ensure that the company’s revenue growth is healthy. In June, Enphase launched IQ8 Microinverters to support high-powered solar modules. The company also expanded its relationship with 4blue to distribute IQ Microinverters and IQ Batteries in the Netherlands, Germany, Belgium, and Luxembourg.
On the date of publication, Faisal Humayun did not hold (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.