The solar energy business has expanded significantly, even though fossil fuels remain the predominant energy source worldwide. Companies in the solar industry originate from various sectors, including utilities, industrial, and energy, and include popular stocks. Even though some large utilities and energy firms have solar and renewable energy sections, they are often not included in industry lists because the parent company's primary concentration is not solar.
It may be time to purchase solar energy stocks or put them on your watch list. The industry's equities had grown overpriced, paving the way for their present decline, exacerbated by a shift away from growth stocks as interest rates rise. The rising input costs amid broader inflation and supply chain restrictions have increased the price of solar installations. In addition, there were growing concerns that the solar-friendly Build Back Better measure would not pass and apprehension regarding anticipated solar sector rule changes in California. These ten solar stocks are significantly less expensive than they were a year ago, making them prime candidates for bargain shopping, given the bright future of the booming solar industry.
How Should We Invest in Solar Energy?
What exactly is solar energy, and why would you invest in it? Solar energy utilizes the light and heat of the sun to generate renewable energy. The most prevalent solar energy is solar panels, which capture photons or light particles using photovoltaic (P.V.) cells. Solar panels provide direct current (D.C.) energy, converted to usable alternating current (A.C.) energy that travels through the electrical panel.
Wind, water, and solar energy are incorporated into the future of energy investment. This fast-developing sector can generate substantial profits for you.
Is Solar Energy an Investment Worthy?
The solar energy industry has the potential to be an excellent long-term investment. Solar energy companies should experience rapid growth, resulting in a rise in stock values, as development is anticipated to quicken in the future years.
1. First Solar
First Solar is the world's foremost developer of solar energy solutions, and it creates, manufactures, and sells solar modules.
First, Solar distinguishes itself from other solar panel manufacturers by emphasizing the production of a proprietary, sophisticated thin-film module. These panels outperform silicon-based alternatives in less-than-ideal conditions, such as low light and high temperatures. Additionally, their increased size reduces the cost per watt, and these characteristics make them excellent for solar energy utility projects.
First, Solar distinguishes itself further from its solar industry competitors by possessing one of the best balance sheets. Typically, it has more cash than debt. This enables it to continue executing its goal of developing and manufacturing thin-film solar modules for utility-scale customers, including growing its manufacturing capacity. As the solar sector grows, these characteristics place First Solar in a solid position to prosper.
2. Array Technologies
Array Technologies is a manufacturer of solar energy projects' ground-mounting equipment. The company's primary offering is an integrated system of steel supports, gearboxes, electric motors, and single-axis trackers. Most of its products cater to solar energy project builders and solar developers. Today, the ARRY stock price increased by 12 percent at the opening bell. Indeed, the company's fourth-quarter and full-year 2021 financial figures, released Tuesday after the market closed, were significantly affected.
The company's quarterly revenue increased by 22 percent to $219.9 million compared to last year. This is essentially a result of the company's products' sustained popularity. In the meantime, its executed contracts and awarded orders totaled $1.8 billion. Array contributed $1.4 billion, while STI Norland contributed $0.4 billion to the total. Array's revenue of $1.4 billion is double that of the same period last year and a 42 percent raise over the prior quarter. The company's growth foundation is more vital than ever as it enters 2022, and there are numerous positives.
3. JinkoSolar
In contrast to Array, which assists solar companies, JinkoSolar is one of the world's largest solar panel manufacturers. In particular, the company constructs a vertically integrated solar product value chain, beginning with silicon wafers and ending with solar modules. Its superior services are solar power generating and engineering, procurement, and construction of solar systems. JinkoSolar has recently revealed that it has shipped 100GW of solar modules worldwide, making the company the first in history to reach this milestone. On a global basis, one out of every ten solar modules is likely manufactured by JinkoSolar.
Moreover, the company just reported high results for the fourth quarter and full year of 2021. Its quarterly sales were $2.57 billion, an increase of 91.2 percent sequentially and 73.9 percent year-over-year. In addition, it reported a non-GAAP net income of $34.3 million, a 12.8-fold sequential and 5.5-fold year-over-year rise. Meanwhile, its quarterly exports increased by 67.9 percent year-over-year to reach 9,693 MW. JinkoSolar is ecstatic to conclude a very tough 2021 with such outstanding accomplishments, and justly so.
4. Enphase
Enphase is another important company in the industry currently. This is an energy technology company that specializes in solar solutions. It is a provider of micro inverter-based solar and battery solutions that allow individuals to capture solar energy. Recently, the corporation has increased its European expansion attempts. In March, Enphase revealed the deployment of home solar systems powered by I.Q. 7+TM and I.Q. 7ATM Microinverters had grown in Spain. Enphase is not a company that rests on its laurels.
The company began the week by expanding its nearly 15-year partnership with Flex, a global manufacturer of various products. Flex will begin producing Enphase microinverters for the European market in Timisoara, Romania, starting in the first quarter of 2023. As energy prices continue to rise, this would address the region's increasing expansion and need for home solar solutions. Additionally, shipping times to consumers within Europe will be enhanced.
5. Brookfield Renewable
Brookfield Renewable is a renewable energy company established by the industry's preeminent alternative asset manager, Brookfield Asset Management (NYSE: BAM). Following long-term power purchase agreements, the energy firm sells renewable energy to end consumers. Brookfield's business model generates consistent cash flow, allowing it to offer a significant dividend return, hence the yield moniker.
Globally, Brookfield Renewable is the industry leader in hydroelectric power facilities. It complements these facilities with rapidly expanding onshore and offshore wind energy, utility-scale and distributed generation (such as rooftop solar), and energy storage platforms.
Within a decade, the clean energy firm anticipates that solar will comprise most of its manufacturing capacity. The reason is not that it doesn't believe in wind or hydropower, but because it sees more significant potential in solar energy. As costs decline, solar development projects become more profitable.
Brookfield has undertaken many purchases to expand its solar energy development capabilities in recent years. It acquired Urban Grid in 2022, a primary U.S. developer of utility-scale solar and energy storage projects. The acquisition increased the renewable energy development pipeline in the United States.
Due to its solar-powered development pipeline, Brookfield will increase its cash flow per share by 6 to 11 percent per year until 2026. In addition, acquisitions provide up to 9 percent of additional growth potential per year. This should enable Brookfield Renewable to achieve excellent overall returns in the future years and support its ambition to enhance its high-yielding dividend by 5 percent to 9 percent. These growth and development patterns make it one of the best dividend stocks for renewable energy.
6. SolarEdge Technologies
SolarEdge Technologies produces power optimizers and inverters that convert solar energy to electricity. These components have enhanced the method by which solar panels convert solar-generated D.C. power into grid-usable A.C. power. A system that employs SolarEdge's power optimizers will be less expensive than one that uses a microinverter manufactured by a business-like as Enphase Energy (NASDAQ: ENPH), with no efficiency loss.
SolarEdge's emphasis on producing low-cost power optimizers has allowed it to gain market share at the expense of competitors, as solar project developers place a premium on cost. Additionally, the company has engaged in acquiring and developing new energy storage and energy management technologies and intelligent modules to enhance its average revenue per installation.
A solid, cash-rich balance sheet complements SolarEdge's leading market position. This affords the organization the financial flexibility to invest in expanding its manufacturing capacity and technological edge over competitors.
It has also enabled SolarEdge to grow into additional smart energy industry categories. The company has invested in and acquired storage, electric vehicle (E.V.) charging, batteries, uninterrupted power supply (UPS) systems, E.V. powertrains, and grid services solutions. These initiatives could accelerate SolarEdge's growth in the following years and have positioned the company for success in implementing its ambition to increase its presence in the rapidly expanding renewable energy industry.
7. Canadian Solar
Canadian Solar, another leading solar power firm, completes the list. Essentially, the company is a global provider of solar power equipment, services, and system solutions. CSI Solar and Global Energy are the two segments under which Canadian Solar works. The CSI Solar section includes the development and production of various solar power products. On the other side, the Worldwide Energy category includes global Solar and energy storage power projects and asset management services. Since the beginning of the year, CSIQ stock has grown by 13%.
In March, the corporation announced its financial results for the fourth quarter and full year of 2021. Its revenue climbed by 47 percent year-over-year to $1.53 billion, in line with projections. In the meantime, its net income was $26 million, or $0.39 per share after dilution. Moreover, the company's gross margin topped expectations at 19.7 percent. Canadian Solar concluded 2021 on a bright note with numerous significant milestones. The market will continue to be tough, but its integrated business model will provide a sustainable competitive edge.
8. Sunlight Financial Holdings Inc. (SUNL)
According to Krull, there is a market demand for solar installation finance that most banks are not meeting. This should be an opportunity for Sunlight Financial, which should be considered one of the top solar stocks due to its involvement in the industry. However, its shares have declined significantly since it went public a year ago. With such little experience in the general market, the company could be dangerous. But the reward might be substantial if demand for residential solar energy systems continues to rise. According to Grand View Research, residential solar photovoltaic sales in the United States might surpass $14 billion by 2028, increasing by $9.1 billion in 2020. Even though the Build Back Better agenda has stagnated, sections of the plan that support the solar industry could still pass, mainly to companies such as Sunlight Financial.
9. Maxeon Solar Technologies Ltd. (MAXN)
Maxeon Solar Technologies is the company SunPower split off as a separate entity. The younger company designs, manufacture, and sells solar panels in over 100 countries. Its utility-scale division won its first big project in India during the third quarter and added approximately 400 megawatts of U.S. projects to its backlog. According to Insider Monkey, which monitors hedge fund sentiment, nine hedge funds were optimistic about the company as of the end of September, an increase from the previous quarter's total of eight positive hedge funds. According to an insider trading and hedge fund data website, Millennium Management increased its interest in the business by almost 500% during the third quarter.
10. SunPower Corp. (SPWR)
The majority of SunPower's manufacturing assets were sold off in 2020, and the company now focuses on selling, installing, and financing solar panels. It recently reached an agreement with TotalEnergies SE to sell its commercial and industrial solutions business. SunPower concentrates increasingly on the residential market following its home provider Blue Raven Solar's acquisition. CEO Peter Faricy stated when the deal was announced, "SunPower is double down on residential expansion." SunPower has also just formed a financial services firm that will offer loans to U.S. homeowners who wish to install solar panels. Strong residential demand has resulted in the most significant sales backlog in SunPower's history, reported in January.
Features to Look for in Solar Stocks
In recent years, solar energy stocks have not been excellent investments. During the decade-long bull market, most solar stocks lagged behind the S&P 500, despite advancements in efficiency and encouragement by governments around the world. There's little doubt that solar energy will play a significant role in our lives in the coming years, but how long are investors ready to wait for widespread adoption?
When searching for solar companies to invest in, it is essential to keep a few key characteristics in mind.
Levels of debt: solar energy is costly. Panels are expensive to manufacture, installations are costly to execute, and storage systems are costly to maintain. As this technology continues to develop, it is expected that these prices will decrease in the future, but solar energy companies now require substantial sums of cash. Ensure that you are not investing in a firm with a dangerous level of debt.
Additionally, solar energy enterprises require substantial capital to maintain a consistent cash flow. Like its oil and gas industry counterparts, solar system manufacturing, installation, and maintenance require expensive equipment, and even solar panels are costly! To ensure that you are purchasing the top solar stocks, you should monitor their cash flows. Here, cash flow and debt are frequently intertwined.
If you're in it for the money, you're in the wrong sector, argues management. Solar energy companies face an uphill battle due to a familiar foe: inertia. Relying on fossil fuels with alternative energy sources would necessitate extensive infrastructure modifications, and adoption will be gradual and laborious. Thus the solar energy company's management team must have the broadest perspective in the room. This is not the industry for cutting corners to save money.
Why Should You Add Solar Stocks to Your Portfolio?
Solar energy firms seek to service two distinct customer groups simultaneously. On the one hand, solar energy is a fantastic public good that would significantly cut the consumption of fossil fuels and promote a healthier environment. On the other side, solar power systems are costly to construct and operate, and businesses in the industry are frequently in debt.
When adding solar stocks to your portfolio, you should analyze both the individual firms' and the industry's advantages and disadvantages. Just because a corporation aims to do good does not necessarily imply that it is well-run. Before investing, always perform extensive due diligence on solar companies and have an exit strategy for speculative trades.
Conclusion
Solar is anticipated to experience the most growth over the next five years among all renewable energy sources. It is also expected to be the leading source of electricity generation by 2050, accounting for 38 percent, followed by wind energy at 20 percent. Since energy drives the global economy, it makes logical for our portfolio to include exposure to both wind and solar. After evaluating the top ten solar stocks on the market, only SolarEdge and Enphase remain. The next step is to investigate these businesses in-depth to determine what makes them tick.
Investing in technology is highly hazardous. Using our stock analysis, investment tools, and portfolios, you can minimize your risk and learn which solar stocks to avoid.
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