Investments in solar energy are accelerating. Solar stocks, represented by the Invesco Solar ETF (TAN), have dramatically outperformed the broader market over the past year. TAN has provided a total return of 199.9% over the last 12 months, well above the Russell 1000’s total return of 20.7%.
The sector is on track to add 10 gigawatts (GW) of new capacity per year through 2022, with that growing to an average annual pace of 18 to 20 GW from 2023 to 2030 thanks to rapidly falling costs for solar panels and battery storage. Solar stocks could thrive over the next decade.
Given the upside potential, investors should strongly consider adding some solar stock to their portfolios. Our research team put together a list of three of the best solar stocks to buy now and hold for the years to come.
Through most of the last decade SunPower (SPWR) underperformed as a vertically integrated supplier of solar panels and services for both residential and utility markets. Today, it is a reseller of Chinese solar panels.
Last year it spun out its manufacturing arm under the name Maxeon Solar Technologies (MAXN). Its Chinese partner, Tianjin Zhonghuan Semiconductor, put nearly $300 million into Maxeon, which also does business in Malaysia, Mexico, the Philippines and France. Maxeon, in turn, has an exclusive deal to supply SunPower with panels. This new structure should enhance shareholder value.
All this is being blessed by Total (TOT), the French oil company that has been SunPower’s dominant shareholder since 2011. Total originally invested in SunPower at $23.25 per share. That investment is still underwater. But Total believed in the new SunPower structure enough to increase its stake, buying 676,000 shares for $31 million.
But how exactly does the new SunPower work? It moves its panels through complex solar leases. The idea is that a solar lease finances the panels and homeowners buy electricity. SunPower now includes its SunVault batteries in these deals.
Essentially, SunPower today is a financing and power sales company. The company boasts a solid four-quarter average earnings surprise of 49.23% and is estimated to generate earnings growth of 324.3% in 2021, according to Zacks Research. SPWR currently carries a Zacks Rank of #2 Buy. Of 10 analyst ratings, 2 rank the stock Strong Buy, 6 rank the stock a Hold and 2 Strong Sell.
Over the next decade, solar power will evolve into a consumer product, something you can buy and use with ease like your smartphone. SolarWindow Technologies (WNDW) is part of that evolution. Its product is a liquid capable of creating an electric charge when applied to glass or plastic. Charge is harvested by a grid of tiny wires, each thinner than a human hair.
This sounds amazingly innovative. However SolarWindow has competition. ClearVue Technologies, which lists in Australia, sells glass integrated with solar cells. It claims its design generates 30 watts per square meter of glass. Ubiquitous Energy, based in San Francisco, has a similar idea.
SolarWindow’s key player is John Rhee, former CEO of the Nobel Sustainability Trust. Rhee brought the company an office in South Korea. He also has quickly built a new executive team around the product. If you’re speculating on SolarWindow stock, you’re betting on Rhee. It’s his new team that must take the company’s coating and process form a dream into a market reality.
SolarEdge Technologies (SEDG) manufactures power optimizers and inverters used to convert the sun’s energy into usable electricity. These components have improved the way that solar panels convert DC power produced by the sun into the AC electricity used by the electrical grid. A system that utilizes SolarEdge’s power optimizers will cost less than one that, for example, uses a microconverter built by a company like Enphase Energy (ENPH), with minimal efficiency loss.
SolarEdge’s focus on manufacturing low-cost power optimizers has enabled it to win market share from its competitors as solar project developers focused on cost. The company has also invested money to acquire and develop new products in the energy storage and energy management spaces, as well as smart modules to help grow its average revenue per installation.
The company complements its leading market position with a strong, cash-rich balance sheet. That provides it with financial flexibility to invest in expanding its manufacturing capacity and technological lead over its competitors. Those factors set SolarEdge Technologies up for success in implementing its plan to expand its reach in the fast-growing solar sector.
Of 12 analysts offering recommendations on the stock, 5 rank the stock as a Strong Buy, along with 5 Hold and 2 Sell ratings.
