Solar stocks to buy on the dip are witnessing renewed enthusiasm with the recent positive economic developments.
May’s cooling inflation rates have weighed down U.S. Treasury yields, ramping up speculation around a potential September interest rate cut. This shift is crucial as high interest rates have played spoilsport for the industry. The record increase in interest rates has made financing for solar installations significantly more costly than traditional electricity sources.
However, with the recent encouraging developments, ETFs like the Invesco Solar ETF (NYSEARCA:TAN) are ticking into the green this month. Investors in TAN stock will have breathed a sigh of relief, considering it lost upwards of 30% in value last year.
Having said that, these solar stocks are the best ways to play the comeback trend, boasting solid financial foundations. Additionally, these stocks are uniquely positioned to capitalize on favorable economic shifts, with the odds of a September rate cut looming large.
Solar Stocks to Buy on the Dip: First Solar (FSLR)
First Solar (NASDAQ:FSLR) is a top player in the U.S.’s burgeoning utility-scale solar energy sector. Its technological edge, robust financial positioning and aggressive geographic expansion make it the best bet for the solar resurgence.
Recent results have been extraordinary. Its first-quarter (Q1) report showed revenues soaring to $794 million, a staggering 44.8% year-over-year (YOY) increase from the prior-year period. Additionally, its GAAP EPS of $2.20 beat estimates by 22 cents. It’s worth noting that its profitability margins are substantially higher than its historical metrics. A lot of it is due to its refined cost management, reducing its cost of sales to just 57% of its trailing 12-month sales, a stark contrast to the 95% seen in 2022.
As we advance, the firm is in excellent shape to benefit from favorable U.S. tax policies and protective measures against foreign competitors. Also, it boasts a massive backlog of almost 80 gigawatts, pointing to a clear runway for sustained growth.
Array Technologies (ARRY)
Array Technologies (NASDAQ:ARRY) is one of the giants in utility-scale solar tracker technology efficiently navigating a testing market landscape. That is shown by the sluggishness in its stock market performance, which saw ARRY stock shedding upwards of 35% year-to-date (YTD).
Furthermore, its Q1 report showed a noticeable dip in sales to $153.4 million, 59.3% lower than the prior-year period. However, on a positive note, its order book swelled to $2.1 billion, signaling a promising horizon ahead. Hence, if current trends persist, this burgeoning demand could set the stage for substantial revenue growth.
ARRY now flaunts impressive financial flexibility, with its annualized free cash flow soaring past the $180 million mark. This financial flexibility is imperative as Array looks to expand its footprint. It recently invested $50 million into a new solar manufacturing campus in Mexico, which should significantly expand production capabilities and fuel future growth.
Shoals (SHLS)
Shoals (NASDAQ:SHLS) is a leading manufacturer and marketer of electrical components for solar-energy projects. However, given the slowdown in the solar space, SHLS stock tanked more than 70% over the last year and now trades for just 2.3 times forward sales estimates.
Recent quarterlies have been forgettable, but the firm expects to end the year relatively strong. Its 2024 revenue guidance peaks at $490 million, a modest 0.2% increase over the previous year. Additionally, it expects adjusted EBITDA to lie between $130 million and $150 million.
However, things are expected to improve substantially next year, with analysts predicting sales to jump to $572 million. Additionally, it expects EPS to rise to 70 cents in 2025 from the 52 cents estimate this year.
Reflecting this optimism, Shoals recently announced an attractive stock repurchase program. It plans to buy over $150 million worth of SHLS stock by the end of 2025.
On the date of publication, Muslim Farooque 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.
