Solar stocks‘ demise has been greatly exaggerated. The U.S. Energy Information Administration reported a 31% surge in solar energy deploy in the first nine months of 2023, reaching 15.8 gigawatts. Additionally, agency estimates 44 gigawatts of solar deployment this year, and 51 gigawatts in 2025.
Some companies in the sector are seeing negative impacts by higher interest rates. But the EIA data shows that the overall demand for solar remains strong in America. Moreover, with inflation heading downwards and the Fed ready to cut rates, it’s a matter of time before the solar sector gets a boost. Finally, as data centers and EVs proliferate, the demand for the cheap electricity provided by solar will surge over the longer term. Here are three top solar stocks to buy before the sector rebounds.
First Solar (FSLR)
In-line with my previous predictions, First Solar (NASDAQ:FSLR) reported strong fourth-quarter results. Its revenue jumped 16% YOY to $1.16 billion. Meanwhile, its net income came in at a very impressive $349 million, versus a loss of $7.5 million during Q4 2022. The company expects its earnings per share to jump to $13-$14 in 2024, compared with $7.74 last year.
Additionally, the firm secured 28.3 gigawatts of net bookings in 2023 and added 10 new customers. Its backlog now amounts to a staggering 80 gigawatts and long-term demand for its modules is still strong.
Moreover, the firm obtained $659 million of tax credits last year, and expects to continue to benefit significantly from tax credits going forward.
NextEra Energy (NEE)
As of last year, NextEra (NYSE:NEE) was the world’s largest solar project developer and the world’s top producer of utility-scale solar plants.
The company’s electricity is primarily bought by large companies, meaning NextEra’s solar business has not been disrupted by elevated interest rates.
Indeed, in 2023, the earnings per share of the firm’s subsidiary, Energy Resources, came in at $1.75, up from 14 cents in 2022.
Meanwhile, NextEra has launched a $65 million green hydrogen pilot project that could represent sizeable long-term growth for the firm. Truckers and factories are utilizing green hydrogen to lower carbon emissions, and airlines are looking to follow a similar path.
Shoals (SHLS)
Shoals (NASDAQ:SHLS) markets electrical equipment used in solar projects. While the company’s guidance suggests that it’s FY 2024 results will be little changed compared to 2023, its Q4 results were strong. However, this FY guidance could turn out to be conservative, as interest rates lowering is likely to spur a strong rebound in the solar sector in the second half of the year.
Last quarter, the company’s top line jumped 38% YOY to $130 million, while its operations income climbed to $31.9 million.
Investment bank Truist remained upbeat on Shoals in the wake of its results. The bank reported unmeaningful company cancellations and continuous growth in its pipelines, towards both existing and new markets at a solid pace.
On the date of publication, Larry Ramer held a long position in SHLS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
