The secular trends that favor solar energy are the same which existed for the last several years. Broadly speaking, concern for climate change continues to grow and demand for cleaner energy sources is increasing. A report from Deloitte highlights the fact that solar photovoltaic (PV) systems have declined 85% in cost over the past decade. That makes them among the cheapest energy sources in the market. The cost model is there, but more development needs to occur.
The current administration has a vision to decarbonize the U.S. economy fully. That is a lofty goal, but it will move the needle whether a wholesale shift occurs or not. In short, solar energy investment remains worthwhile.
Here are the seven best solar stocks to buy now:
|SEDG||SolarEdge Technologies, Inc.||$319.88|
|DQ||Daqo New Energy Corp.||$63.55|
|CSIQ||Canadian Solar Inc.||$33.83|
|ENPH||Enphase Energy, Inc.||$249.51|
|TAN||Invesco Solar ETF||$75.81|
|FSLR||First Solar, Inc.||$76.40|
|SHLS||Shoals Technologies Group, Inc.||$18.67|
Best Solar Stocks: SolarEdge (SEDG)
SolarEdge Technologies (NASDAQ:SEDG) is an Israeli firm that produces solar inverters. Solar inverters transform the energy collected from PV cells into energy that can be used on a grid. Without them, a home, business, or solar farm has no way to utilize the energy collected and stored by PV cells and arrays.
SolarEdge is focused on marketing its inverters not only as transmission conduits, but also as smart energy management devices, which allow users to monitor and manage storage and use.
SolarEdge will provide earnings results in early August, which may or may not disappoint. Investors should focus on the broader picture here: SolarEdge is expected to make roughly $3.05 billion in sales this year. That number is expected to rise by 25.9% to $3.84 billion next year. That growth story means SEDG stock will remain relevant.
Daqo New Energy (DQ)
Daqo New Energy (NYSE:DQ) stock represents a Chinese company that produces the polysilicon that is sold to PV cell manufacturers. Its story is one of rapid growth, increasing production volumes, and price appreciation during a tumultuous 2022.
Let’s start with price appreciation first: DQ stock has gone from $42 in early 2022 to $63. That makes it something of an outlier in the current bear market. The stock is performing well because the company is performing well. Additionally, Revenues increased to $1.28 billion in the first quarter, up 400% from a year earlier. That rapid increase in sales allowed gross profits to rise from $118.9 million to $813.6 million in the same period.
Daqo New Energy is expanding its sales base rapidly. The firm sold 23,616 metric tons of polysilicon in the fourth quarter of 2021. That figure reached 31,383 metric tons a quarter later. Daqo New Energy is a basic materials provider, making it a smart choice to take advantage of secular trends.
Best Solar Stocks: Canadian Solar (CSIQ)
Solar investors seeking product manufacturers would be wise to consider Canadian Solar (NASDAQ:CSIQ) stock. The Ontario firm manufactures PV modules and has roughly 34% upside based on its target price.
So, for investors who want to add a PV module manufacturing stock to their portfolio, CSIQ makes sense because it is increasingly attractive. Earnings per share (EPS) estimates sat at 21 cents three months ago. Those estimates have risen rapidly and now sit at 48 cents.
Investors will be encouraged by the fact that Canadian Solar produced a net income of $9 million in its most recent quarter. That was a strong result on a year-over-year basis.
However, high costs held the firm’s revenue and gross margin figures at the lower end of guidance. As costs normalize, the firm should be able to produce stronger results closer to the top end of guidance.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) stock is certainly volatile. A look at the price chart for the stock in 2022 reflects that. And that choppiness is evident in the 1.36 beta ENPH shares carry.
But while that volatility can seem scary at times, it’s the greater trends that make Enphase Energy a worthy investment. When all is said and done, Enphase Energy should record around $2 billion in revenues this year. Those revenues are expected to increase about 37% in 2023 to $2.75 billion.
The argument against ENPH is that net income numbers were slightly lower during the most recent quarter on a sequential basis, despite record revenues. But as higher costs normalize, investors should begin to calm down. I’d argue that now is the time to strike because Enphase is doing remarkably well considering the overall environment.
Best Solar Stocks: Invesco Solar ETF (TAN)
The reason to invest in exchange-traded funds (ETFs) is obvious: It is much easier to identify winning sectors than it is to separate the winners from the losers therein. That’s why the Invesco Solar ETF (NYSEARCA:TAN) makes sense as a stock pick.
Given that the Invesco Solar ETF tracks the MAC Global Solar Energy Index, investors are receiving significant exposure to secular trends in solar energy stocks. Those secular trends indicate that solar is entrenched as costs have come down drastically over the past decade.
TAN stock has provided average annual returns of 17.85% over the past decade. Those returns significantly outpaced those of its peers within its exchange and would have turned $1,000 into more than $5,000 in that period.
That is precisely the kind of information that investors who want to set it and forget it like to hear.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is an Arizona-based firm producing solar power systems and modules. On top of that, the firm also constructs and operates PV power plants.
As reshoring efforts ramp up, First Solar will become an increasingly attractive choice in solar. The firm has the largest PV manufacturing footprint in the western hemisphere. It is set to expand that footprint in 2023. The company also proudly markets the fact that it does not rely on Chinese silicon for its manufacturing operations. That bolsters the notion that First Solar could rise in importance over the coming years as U.S.-China business relations remain tense and evolve.
For investors who worry that materials of Chinese origin occupy too large a portion of our supply chain, FSLR makes sense. It is among the best choices from that perspective among solar stocks.
Best Solar Stocks: Shoals Technologies (SHLS)
Shoals Technologies (NASDAQ:SHLS) stock is a strong choice for the solar investor who has a penchant for speculation and some risk. While the company has recorded two straight quarters in which EPS guidance fell short, it is growing rapidly. And while revenues increased by about 50% on a year-over-year basis in the most recent quarter, net income is arguably more impressive.
Shoals Technologies reported a net loss in first quarter 2021 that approached $8.3 million. A year later and that net loss became a $4.6 million net income. This is impressive.
Growth stocks are out because their fundamentals often include large losses. Shoals Technologies provides the best of both worlds in some sense: Rapid growth and net income.
On the date of publication, Alex Sirois 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.