Over the past two years, solar panel makers have been hampered by supply chain disruptions, including rising material costs for polysilicon. Indeed, last year, Rystad Energy estimated that rising equipment and shipping costs could cause the postponement or cancellation of 56% of large-scale solar projects worldwide that had been planned for 2022.
Fortunately, these challenges quickly faded away. Energy prices have returned to pre-war levels, pushed lower by fears of a global recession and weak oil demand in China due to Covid outbreaks. The same scenario is playing out in the solar sector, with Bloomberg New Energy Finance (BNEF) reporting that solar material costs have fallen by more than a third since mid-November. Wafer prices fell even more sharply, with wafer costs dropping 21% this week alone.
Even better, huge sums are flowing into the solar sector.
The amount of capital investment in the solar sector is set to exceed the amount of investment in oil production for the first time in 2023, the International Energy Association reported.
According to IEA Executive Director Fatih Birol, solar investments are expected to attract more than $1 billion a day in 2023, including more than $1.7 trillion to power clean energy technologies such as vehicles. electricity, renewable energies and storage. Overall, global energy investments are expected to reach around $2.8 trillion in the current year.
Speaking to CNBC’s Arabile Gumede on Thursday, Birol said there was a “growing gap between investment in fossil fuels and investment [in] clean energy. Clean energy moves fast – faster than many people realize. This is clearly seen in investment trends, where clean technologies are moving away from fossil fuels. For every dollar invested in fossil fuels, approximately $1.7 is now spent on clean energy.
Since the energy crisis hit two years ago, many governments around the world have doubled their investment in renewable energy, as they see the sector as an ideal way to not only decarbonize, but also achieve energy security. Additionally, several oil-producing hubs, including Saudi Arabia and the United Arab Emirates, are investing heavily in renewable energy as they attempt to diversify their economies.
Here are 5 solar stocks for long-term investors.
First Solar
Market cap: $21.0 billion
Returns over 12 months: 165.8%
Premier Solaire Inc. (NASDAQ: FSLR) is the largest US-based solar panel developer, with a focus on large-scale panels. First Solar claims to have the ability to manufacture more than 20 gigawatts of panel capacity per year and has spent a cumulative $1.5 billion on R&D since its inception in 1999.
Goldman’s Brian Lee predicted that First Solar would be one of the companies that will benefit the most from the IRA, “FSLR currently has approximately 3GW of capacity in the US, positioning the company as an immediate beneficiary of credits. IRA Manufacturing Tax FSLR expects to reach approximately 7 GW of nameplate capacity in the US by YE2023 and approximately 10 GW by YE2025 Assuming FSLR qualifies for the credits of $0.17/w, we estimate that these credits represent approximately 60% of FSLR’s ASP, and the 10 GW capacity would imply an after-tax benefit of approximately $1.4 billion/year.
Last year, First Solar announced that it would build a new solar panel manufacturing facility in the southeastern United States. In November, the company chose Lawrence County, Alabama as the location for its $1.1 billion plant. The company also plans to spend $185 million to upgrade and expand its existing facilities in Ohio. The announcement came on the heels of the passage of the IRA Act, underscoring the impact it is likely to have on First Solar’s business.
However, not all Wall Street analysts are bullish on FSLR, particularly in the near term, with JPMorgan saying easy money has likely been won while GLJ Research downgrades the stock from a buy to a sell.
Enphase Energy
Market cap: $25.0 billion
12-month returns: -13.1%
Enphase Energy Inc. (NASDAQ: ENPH) is a leading designer and manufacturer of solar inverters, an essential piece of equipment used in all solar power installations. Over the past three years, Enphase has seen steady growth in earnings and revenue, with Q3 2022 earnings reaching $634.7 million, a quarterly record and good for impressive 80% year-over-year growth. annual. What’s even more remarkable is that Enphase is not only solidly profitable, but also has one of the largest profit margins among the major solar names with a gross margin north of 40%. Its closest rival in this regard is SolarEdge Technologies (NASDAQ: SEDG) with GM of 29%. Interestingly, SolarEdge is one of the solar stocks that recently received an upgrade: in December, Cowen reiterated its outperform rating on SEDG and raised its price target to $360 from $309, analyst Jeffrey Osborne writing that SEDG is “well positioned to benefit from secular solar demand driven by politics and higher electricity rates.”
Regarding the effects of the IRA on Enphase, analyst Brian Lee notes that it is potentially a “direct, short-term beneficiary of manufacturing credits”.
“Assuming ENPH were to establish a US capability, ENPH would be eligible to capture the full amount of these credits, according to management. Additionally, we believe ENPH is well positioned to benefit from the expansion of the Solar ITC which we believe will support a more stable demand environment for residential and commercial solar and storage installations in the United States,” according to the analyst.
Network Technologies
Market cap: $3.4 billion
Returns over 12 months: 69.2%
Based in Albuquerque, New Mexico Network Technologies (NASDAQ: ARRY) designs and manufactures ground-based solar monitoring systems. This company rose to fame for all the wrong reasons, after the stock plummeted dramatically following its October 2021 IPO. of the last 12 months.
Lately, ARRY seems to be getting a lot of love on Wall Street, with Brian Lee predicting that he will be “an immediate beneficiary of the tailwinds of IRA demand.” Lee specifically points to the extension of the solar ITC to 30% for the next decade, which provides great certainty to the market.
Cantor Fitzgerald assesses ARRY’s overweight:
“We believe Array is a logical long-term partner for engineering, procurement and construction companies and large-scale solar operators, given the company’s proven track record, robust supply chain and its differentiated product offering.wrote Derek Soderberg in a note to investors.
Last year, Piper Sandler upgraded ARRY shares from Neutral to Overweight with a price target of $28, good for a 53% upside, saying they expect the outlook for the energy company to improve. renewable.
JinkoSolar Holdings Co
Market cap: $2.1 billion
12-month returns: -37.9%%
JinkoSolar Holdings Co. (NASDAQ: JKS) is the world’s largest manufacturer of solar panels. In January, ROTH Capital upgraded the company to Buy from Neutral with a price target of $70 (implied 72% upside), citing an improving political situation in the US and the potential for margin expansion as polysilicon prices continue to fall. Polysilicon prices have fallen more than 40% in two months.
“Job [third-quarter] results, we had already increased our estimates by a reasonable amount. Given the poly price collapse, we see potential for higher margins ahead and plan to update our model after JKS’ upcoming Q4 results,” ROTH said in a note.
Last December, US Customs and Border Protection released a large shipment of solar panels for sale in the US market that they had seized under the Uyghur Forced Labor Prevention Act (UFLPA). According to ROTH Capital Managing Director Philip Shen, the UFLPA release is a boon for JinkoSolar as it removes a huge political risk that JKS faced. Under the UFLPA, the burden of proof that goods imported from China’s Xinjiang region were not made with slave labor rests with the buyer. Companies are required to provide a complete list of all employees at their facilities, a detailed breakdown of the distribution network, and sufficient evidence to prove that workers have not been subjected to forced labor conditions. According to ROTH, as many as 12 GW of solar modules could be banned from entering the United States in 2023.
Equitrans Midstream Corp.
Market cap: $4.2 billion
Returns over 12 months: 10.8%
Equitrans Midstream Corporation (NYSE:ETRN) owns, operates, acquires and develops midstream assets in the Appalachian Basin. ETRN shares were on a tear after the U.S. Bureau of Land Management approved the right-of-way allowing the Mountain Valley Pipeline to cross the Jefferson National Forest straddling Virginia and West Virginia.
Morgan Stanley doubled the overweight ETRN stock from underweight with a price target of $14 at the street high versus $7 previously, implying a nearly 50% upside.
According to Morgan Stanley analyst Robert Kad, Mountain Valley Pipeline and related full-year impacts would increase the company’s 2024 EBITDA before deferred revenue to nearly $1.49 billion. The analyst also noted that MVP has fully underwritten its 2 bcf/day capacity under 20-year firm commitments.
By Alex Kimani for Oilprice.com
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