Solar stocks have been in sharp focus since 2021. That’s when the Biden administration ushered in what has been the most renewable energy-friendly administration, at least in terms of the billions of dollars being funneled to the industry.
Since investor money tends to follow government largesse, this spending launched a rush into solar stocks. But that initial surge is long gone. Many of these stocks are down sharply from their all-time highs. This has some investors believing that the opportunity in solar stocks is gone.
As is often the case, the truth likely lies somewhere in between these two emotional extremes. Sticky inflation and higher-for-longer interest rates are not favorable for consumers and capital-intensive solar companies. Nobody knows how long that could be a headwind.
On the other hand, the International Energy Agency (IEA) reminds investors that solar photovoltaic (PV) technology continues to be the primary renewable energy solution of choice by the private sector. The IEA is also forecasting solar PV to account for 22% of global power capacity by 2027.
The message for investors: take a step back, remove the emotion and look for quality names. Fortunately, you have several names to consider. Here are three solar stocks that belong on a watch list for 2024 and beyond. If the fortunes for the sector change, these stocks are primed to lead the rally.
First Solar (FSLR)
Among all solar stocks, First Solar (NASDAQ:FSLR) stands out by being one of the “least bad” performers of 2023. FSLR stock is only down 2.12% year-to-date. That corresponds to the company’s release of its third quarter earnings report. The company is supposed to delivered a solid report, which gave a slight boost to the stock.
So why should investors consider FSLR stock? For starters, the company only sells to utility operators which means it doesn’t have exposure to the more volatile residential market. And second, the company has a strong backlog of orders.
It also doesn’t hurt that First Solar is headquartered in the United States at a time when the U.S government is rewarding made in America brands as it tries to shorten supply chains.
Of the 30 analysts that have issued a rating on FSLR stock, 21 give the stock the equivalent of a buy or strong buy rating. And the stock has an average price target of $242.10 which is 70% higher than its current price.
Array Technologies (ARRY)
Array Technologies (NASDAQ:ARRY) is next on this list of down, but not out, solar stocks. The company specializes in solar tracking solutions. These trackers adjust the orientation of solar panels so that they follow the sun for maximum efficiency and output.
ARRY stock is down 12% in 2023 and 21% over the last month. That may have to do with a price-to-earnings (P/E) ratio of around 33x earnings. However, the company’s forward P/E ratio is a more palatable 18x. That should allow investors to take a closer look at the company’s earnings which show continuing year-over-year (YoY) growth in revenue and earnings.
18 out of 23 analysts give ARRY stock the equivalent of a Buy or Strong Buy rating. And the average price target of $30.70.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ;ENPH) is the stock on this list that has shown the largest decline. ENPH stock is down nearly 70% in 2023 and is now trading at levels not seen since 2020. At that time, Enphase had already shot up more than 10x in just under two years.
The company’s signature product is its inverters that convert DC power to AC power. However, the company has developed a comprehensive home energy management system that encompasses solar storage and an EV charger.
That being said, the company has been acutely affected by interest rates and by electric regulations in California. That means, investors may have gotten ahead of themselves. But with a Relative Strength Index in the upper 20’s, the sell-off in ENPH stock looks overdone. The company had a slight miss on revenue in its most recent quarter, but the long-term outlook suggests this may be a great time to start a position.
On the date of publication, Chris Markoch 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.
