Just last month, the International Energy Agency (IEA) announced some groundbreaking news.
They said that solar energy is taking over the world.
OK… the IEA didn’t say that word-for-word. But they may as well have, because what they did say word-for-word in their 464-page 2020 annual energy outlook report is this:
“…solar [energy] is now the cheapest source of electricity in history.”
What more do solar bulls need?
In 2020, all the economic and sociopolitical drivers you could ask for have shown up to party.
You have widespread government support of solar adoption, with more than 200 cities and countries across the world implementing a “100% clean energy” target for 2030, 2040, or 2050…
You have dramatically improving solar technology, with a new generation of advanced optimizers boosting solar module power output and storage solutions increasing the versatility and applicability of solar (26% of solar systems will be paired with storage capability by 2025, versus just 4% in 2019)…
You have rapidly shifting consumer demand, as 46% of U.S. homeowners are seriously thinking about adding solar panels to their homes today, up from 40% in 2016…
And now you have widening economic benefits, with the cost of solar plunging below the cost of non-renewable energy, and that gap set to only widen thanks to incentives, improving technology, and economies of scale.
The global stage is set.
Over the next 10 to 20 years, solar is going to take over the world. By the 2030s, we will be living in a world powered mostly by solar energy.
Wall Street knows this.
That’s why the Invesco Solar ETF (TAN) is up a jaw-dropping 167% year-to-date.
To put that in perspective, the absolute best year the S&P 500 has had in the past 45 years was in 1995, when the index rose 34%.
In other words, solar stocks in 2020 are performing almost five times better than the stock market ever has in the past five decades…
And believe it or not, there’s still lots of runways left in solar stocks.
The biggest solar companies in the world today – like SolarEdge (SEDG), First Solar (FSLR), and Sunrun (RUN) – are worth around $10 billion. Most of the solar companies out there feature sub-$5 billion market caps.
The global energy market is worth trillions of dollars, and the current titans of this multi-trillion-dollar industry – like Duke Energy (DUK) and Dominion (D) – have $70 billion market caps.
Thus, while solar stocks have staged a mind-boggling rally in 2020, this breakout is just the beginning of a much longer uptrend throughout the next decade wherein solar companies turn into $50-plus billion titans of the global energy industry.
That means there are multi-bagger returns to be had in the solar space.
Where should you start looking?
Among the big, headline players in the market, I like SolarEdge.
The company makes best-in-breed solar module optimizers, which are increasingly becoming necessary to boost the power performance of solar systems. These optimizers are essentially the technology backbone of good solar panels – and SolarEdge dominates the market for optimizers.
To that end, the company should scale step-for-step with the global solar market, turning into a technology provider for all high-quality solar panels in the world.
Among the mid-size solar companies with more upside potential, SunPower (SPWR), JinkoSolar (JKS), and Sunnova (NOVA) are all very interesting.
SunPower is a downstream, integrated solar energy distribution and storage leader who’s bread-and-butter is making the market’s most efficient solar panels. They are essentially a pure-play on the premium solar market.
JinkoSolar is a Chinese solar module manufacturer that is the best turnaround story in the industry, and the company is on the cutting edge of combining low-cost production with high-quality panels to deliver great solar panels at equally great prices.
Sunnova, meanwhile, is a residential solar service provider that essentially connects all the upstream panel makers in the solar market, to all the downstream panel installers, through one platform. In so doing, the company is basically trying to turn into a solar energy marketplace.
All of those stocks have 100%-plus upside potential.
There are also a few small-cap solar stocks with 10X upside potential that I like in this red-hot megatrend (no pun intended) … but we will save those for another day.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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