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An Insight into Solar Stocks
It is no secret that solar stocks are hot topics in the renewable energy sector, as they are a clean and abundant source of electricity for households, businesses, and utilities. There is also potential for solar stocks to deliver long-term gains to investors in the coming years, as solar energy demand is expected to grow significantly in the near future, resulting in a rise in solar stock prices.
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Here are some promising solar stocks to watch in 2023.
If we were to talk about solar energy, one of the first things that would come to mind is a large solar panel. In spite of this, the solar industry consists of a myriad of segments, including manufacturers, installers, developers, and service providers. Manufacturers produce solar panels, inverters, trackers, and other components to convert sunlight into electricity. Installers and developers of solar projects are responsible for developing, designing, building, and managing them for residential, commercial, and utility customers. In terms of service providers, they offer solutions to support the solar industry in terms of financing, maintenance, monitoring, and other services.
Despite the growth of the solar industry, it is facing several challenges, such as high up-front costs, intermittent production, problems with grid integration, as well as competition from other renewable energy sources.
The Solar Industry Opportunities.
Solar energy costs have declined dramatically over the past decade, thanks to technological innovations, economies of scale, and policy incentives. According to Bloomberg New Energy Finance (BNEF), the global average levelized cost of electricity (LCOE) for utility-scale solar projects fell from $0.38 per kilowatt-hour (kWh) in 2010 to $0.05 per kWh in 2020. BNEF expects solar LCOE to drop further to $0.03 per kWh by 2030.
Solar energy is in demand for a variety of reasons, such as environmental concerns, energy security, social responsibility, and cost savings. According to the International Energy Agency (IEA), global solar capacity increased from 40 gigawatts (GW) in 2010 to 714 GW in 2020. The IEA projects solar capacity will reach 1,864 GW by 2030 and 4,039 GW by 2040.
A solar module import tariff and production credits enhance local manufacturing as part of the US Inflation Reduction Act, which is driving a 500% expansion in solar manufacturing capacity by 2024 and a doubling of solar installations to 40-50 GW per year by 2030.
The solar industry benefits from policies encouraging adoption and development. These policies include feed-in tariffs, net metering, tax credits, subsidies, mandates, and auctions. These policies vary by country and region but generally aim to reduce solar investors and consumers’ barriers and risks. For example, in the U.S., the federal investment tax credit (ITC) provides Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation period between 2022-2032. “It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034.”
The aforementioned factors make investing in solar stocks a rewarding strategy for long-term investors who want to capitalize on the growth of the solar industry in the coming years.
Enphase Energy (NASDAQ: ENPH)
Founded in Fremont, California in 2000, Enphase Energy is one of the world’s leading energy technology companies producing microinverter-based solar and battery systems that enable people to harness the sun’s energy to produce, use, save, and sell their own power, as well as control it with a smart mobile app. With its microinverter-based technology, the company revolutionized the solar industry.
The stock is currently trading at $181.81 with a 1.39% increase over the past week, with an average target price of $258. The average price target represents a 43.27% upside from the last price. The high forecast is $302.00 and a low forecast of $169.00. The company has been trading below its 50-day and 200-day moving averages of $180.07 and $219.69 respectively since mid-May 2023.
The stock which had been constantly slipping since last year dropped again on April 25, 2023 after its disappointing earnings announcement. Enphase Energy’s stock dropped 25% after it said its U.S. sales growth could slow due to weak demand for its solar products. The issue is going to be bad for the solar industry since Enphase (NASDAQ: ENPH) has been one of the industry’s standout performers and has seemed resilient to market pressures until now. Nevertheless, the company is still listed on a discount as the stock was previously valued at $330 in December 2022.
Why is it a buy?
Enphase Energy, Inc. (NASDAQ: ENPH) recently announced the launch of the IQTM Energy Router family of devices in Germany and Austria to enable the integration of select third-party electric vehicle (EV) chargers and heat pumps into Enphase solar and battery systems.
Enphase is working with EV chargers and heat pump manufacturers to integrate their products with the Enphase Energy System. Through the Enphase Energy System, homeowners can maximize self-consumption by using artificial intelligence-based solar production forecasting, consumption forecasting, and optimization engines.
“We’re witnessing a rapid acceleration of home electrification and clean energy adoption, and Enphase is now offering a complete solution to manage it all from a single mobile app,” said Marco Krapels, vice president of international sales at Enphase Energy
Currently, institutional investors own 73.79% of the stock. A $28,000 investment stake was acquired by Thompson Siegel & Walmsley LLC during Q3 2022, while similar investments were made by Align Wealth Management LLC and NewSquare Capital LLC during Q4 2022. Godsey & Gibb Inc. and Resurgent Financial Advisors LLC also purchased positions in Enphase Energy, bringing the total number of recent investments to five.
Nevertheless, with a price-to-earnings-growth ratio of 1.72 and a beta of 1.50 demonstrating strong forward earnings growth expectations along with price stability (volatility measured relative to the market), Enphase Energy appears to be a stock that prudent and astute investors should consider.
Shoals Technologies Group (NASDAQ:SHLS).
The stock is currently listed at $24.74 with an average target price of $9.67. The stock’s performance over the year of 2023 has been consistent with a YTD increase of 3.34%. Since early May, the price has increased by 7%.
On May 8th this year, the company posted better than expected Q1 earnings results with earnings per share coming in at $0.12 compared to Wall Street estimates that they would report earnings per share worth roughly $0.08 during that same period.
The stock has been rising continuously since May 9, 2023. The price increased from $19.72 to $24.11; a 22.26% increase. Volume rose follows better-than-expected first-quarter earnings. The average price target is $29.67 with a high forecast of $42.00 and a low forecast of $19.00. The average price target represents a 19.93% change from the last price of $24.74.
SHLS price is still trading at a discount after its initial public offering on January,27 2021 at $25. It later closed at $30.98.
Why is it a buy?
Shoals Technologies Group, Inc. (NASDAQ:SHLS) is one of the most promising solar stocks to invest in 2023. The company provides solutions and components for electrical balance of system (EBOS) applications. Among them are solar energy, battery energy, and the charging of electric vehicles. The company also designs and manufactures electrical components for solar installations and energy storage systems.
Business units include electrical balance of systems (EBOS), battery energy storage solutions (BESS), and electric vehicle charging balance of systems, where EBOS transports electricity from solar panels to an inverter for distribution.
In fact, Shoals Technologies Group now has almost 82% of its stock owned by institutional investors.
The Shoals Technologies Group is responsible for providing electrical balance-of-system solutions for solar energy projects throughout the United States. Additionally, they manufacture cable assemblies, inline fuses, junction boxes, splice boxes, along with other innovative technologies aimed at optimizing energy generation.
Following news that Technologies Group signed a deal with Blattner to provide 10 gigawatts of Big Lead Assembly and systems solutions over the next two years, Technologies Group shares traded in the green on Monday June 12, 2023. Shoals did not disclose how much revenue the order would generate. In addition to the order, the company also has been contracted to supply its BLA+ solution to a utility-scale solar project in Western Australia for 120 megawatts.
Shoals said it provides “electrical balance of systems solutions for solar, storage, and electric vehicle charging infrastructure.”
Similarly to ENPH, Sholas Technologies Group had a price-to-earnings-growth ratio of 1.72 and a beta of 1.41, indicating solid earnings growth expectations as well as price stability (volatility relative to the market).
Solar energy is becoming increasingly popular and is seen as a reliable and cost-effective source of energy. Investing in a solar energy company is likely to yield good returns in the long run. Therefore, it can be a good option for investors looking for a good return on their investments. Along with its commitment to renewable energy sources makes it an attractive investment for those looking to make a positive difference in the world.
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