Solar stocks have been on fire lately (pun intended). The sector is getting a boost from the Biden administration, which has announced a broad target to get 45% of the country’s energy supply from solar by 2050. That is more than the 4% the sector delivered in 2020.
And as one of many steps to achieve this goal, the sector was given an additional catalyst in June when the Biden administration announced it would suspend tariffs on solar panel components from four countries.
Think of this as a lock and a key. The lock is the 45% target. Suspending tariffs is one of the keys the government uses to solve supply chain bottlenecks.
However, the tariff news is only accelerating a trend that has been building for years. Several research firms agree that the solar energy market will grow at a compound annual growth rate (CAGR) of more than 20% over the next five years. And Fortune Business Insights estimates that the global market will be worth $1 trillion by the end of 2028.
Many companies will benefit from this trend. This article highlights three stocks looking to capitalize on the solar rush.
A market leader with more growth in the store
Sun tanning (NASDAQ:RUN) has one of the largest installed bases in the United States. The company is known for its solar and battery storage solutions for the home, including solar panels, racks and solar cables. The San Francisco-based company has more than 600,000 customers in 22 states.
Unlike the other two stocks on this list, Sunrun stocks are flat in 2022. That places FUN stock well below current analyst expectations of $48 per share. But you can’t blame that on the income. Sunrun is posting strong sequential and year-over-year revenue growth. And with the CAGR projections for the industry, that’s not likely to slow down.
The problem may be more of the revenue. Sunrun is still not delivering consistently positive results. In the most recent quarter, however, it posted a solid 70% gain on earnings of 6 cents per share, as opposed to the forecast 20 cents per share.
This leading US manufacturer forecasts strong sales growth
First solar energy (NASDAQ:FSLR) will be one of the solar companies to benefit most from the Biden administration’s inflation-cutting bill. Specifically, the bill provides $40 million in support to solar manufacturers. First Solar is a US-based company that already has production infrastructure up and running.
The company produces solar energy systems and modules and is known for its own thin film module. This provides better performance in low light and warm weather. In addition, the modules are larger than other modules, which helps to reduce the cost per watt.
First Solar plans to increase its manufacturing footprint using the money it receives from this legislation. And the company shows a strong order backlog through 2024.
However, some investors may wonder if it is too late to join the rally. FSLR shares are already up 49% this year and all gains come after the announcement of the tariff suspensions. That has pushed stock trading above consensus price targets of analysts followed by MarketBeat. But with sales expected to grow by an average of 27% over the next two years, the stock is likely to have more upside potential, especially with the knowledge that its manufacturing operations do not rely on silicon from China.
A compelling partnership adds juice to this business
The last stock on this short list of solar stocks is SunPower Corporation (NASDAQ:SPWR). This is another American company that provides solar, storage and home energy solutions. And while it has commercial customers, it’s the company’s appeal to private consumers that caught my eye.
In particular, SunPower has a collaboration with IKEA with the aim of making solar energy more accessible to consumers. The partnership will begin this fall in select markets in California.
SPWR shares are up 26% this year and are above the current price target of analysts followed by MarketBeat. However, analysts have raised their price targets after the company posted revenue 60% higher than last year. The company also cites a strong order book for its products that adds credibility to future revenue and earnings growth.