Investing in promising solar stocks offers investors significant potential for outsized returns as the global economy transitions to green energy. The global solar power market was last valued at $234.86 billion in 2022 and is expected to grow at a CAGR of 6.9% from 2022 – 2029.
As the United States sets its sights on net zero emissions by 2050, the Inflation Reduction Act will help drive solar manufacturing and deployment. While the market faces growing macroeconomic uncertainties, investors have the opportunity to buy undervalued solar stocks at a discount. With new solar installations expected 800 GW by 2030, these 3 solar stocks have major room for growth.
Below are my top three cheap solar stocks to buy right now.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) is an American diversified energy holding company with approximately 58 GW of generating capacity.
They are the world’s largest generator of renewable energy from the wind and the sun. Some of their notable subsidiaries include; Florida Power & Light, NextEra Energy Partners, NextEra Energy Resources, and Gulf Power Company.
In Q2 2023, NEE’s total revenue grew to $7.35 billion, up 42% year-over-year. Net income surged more than 100% year-over-year to $2.8 billion. EPS (Earnings Per Share) was $1.38 cents, compared to $0.70 cents in the year prior. NextEra is executing on all cylinders, with adjusted EPS growth of approximately 8.6% for the quarter.
The company added 1665 megawatts of new renewable projects in the quarter, with a backlog for the year now totaling 20 gigawatts. NextEra has also been a strong dividend growth stock, delivering a nearly 10% CAGR in its dividend per share over the last decade.
This has led the company to issue multiple share buybacks, with total shareholder returns of more than 300%. Furthermore, their wholly-owned subsidiary, FPL, has focused its efforts on deploying cost-effective solar solutions for its more than 5 million customers.
NextEra Energy projects that the new Solar Production Tax Credits will save FPL more than $400 million annually. With the solar industry set for explosive growth over the decade, NextEra Energy is a no-brainer solar stock to buy while it’s still cheap.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) has suffered steep declines in 2023 driven by solar industry-related headwinds.
The overall market sentiment has been negative, despite Enphase’s solid year-over-year growth. Enphase is a leading supplier of micro-inverter-based solar and has been dominating the market for nearly two decades.
The company aims to leverage the Inflation Reduction Act tax credits to bring manufacturing jobs to the U.S. and produce 10M micro-inverters per quarter. After reporting their Q2 2023 earnings results, they still saw strong year-over-year growth.
However, quarter over quarter shrunk due to ongoing macroeconomic challenges. ENPH’s Q2 2023 revenues were $711 million, an increase of 34% year-over-year. EPS (Earnings Per Share) was $1.09, up 102% year-over-year.
Enphase’s valuation has come down substantially from its 2022 peak. The stock has traded at very rich valuations in the past, and its P/E ratio has fallen from more than 200 to under 30 in the last two years.
When you factor in Enphase’s strong gross margins (45%+), revenue growth, and free cash flow from operations, it is a no-brainer buy right now. As the company strengthens its supply chains for the IQ8P Micro-inverters and IQ Battery packs, Enphase is one of the solar stocks to buy for 2023.
Solaredge Technologies (SEDG)
Solaredge Technologies (NASDAQ: SEDG) is one of the most promising solar stocks to buy for 2023.
The stock is down nearly 20% in the last month, as a result of broader uncertainties in the solar industry.
Solaredge Technologies is one of the market leaders in solar micro-inverters and energy storage solutions. The company serves both the residential and commercial markets, with operations in more than 125 countries. What separates SEDG from its competition is its strong IP portfolio and energy storage solutions.
They own nearly 500 patents, and their business model allows them to expand into new renewable energy markets. In Q2 2023, the company saw its revenue up 36% year-over-year to $991.3 million. GAAP EPS (Earnings Per Share) surged more than 600% to $2.03, driven by record shipments of 4.3 GW of micro-inverters.
SEDG has also continued to see strong year-over-year growth in GAAP gross margins, despite ongoing supply chain constraints. The company remains well capitalized to weather the storm with approximately $1.48 billion in cash and short-term securities.
If you’re looking for promising solar stocks to buy for 2023, Solaredge Technologies should be at the top of your list.
On the date of publication, Terel Miles 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.
