In a bold move, the Biden administration recently revealed its plans to double the import tax on Chinese solar cells, lifting it from 25% to 50%. This strategic decision is part of a broader package of tariff hikes the White House says will safeguard American industries from unfair competition and empower them to scale up their capacity, and it’s also the latest salvo in the increasingly chilly trade tensions between Washington and Beijing that have impacted industries from steel to semiconductors.
With the increasing momentum behind solar energy, this major development has sparked notable investor interest in solar stocks. Coupled with Wall Street’s briefly revived interest in meme stocks, solar industry player SunPower Corporation (SPWR) benefited the most from this news, with its shares experiencing an impressive surge.
However, Wall Street analysts are not as optimistic as investors. SunPower stock currently holds a consensus "Moderate Sell" rating, with 37% of the 27 analysts covering the stock rating it as a "Strong Sell." That said, here are three solar stocks that are higher-rated by Wall Street analysts and could be a better catch than SunPower.
Let’s take a closer look at them.
Solar Stock #1: First Solar
With a market cap of $21.2 billion, Arizona-based First Solar, Inc. (FSLR) is a leading American solar technology company known for its advanced thin film photovoltaic (PV) modules. First Solar's eco-efficient modules offer a high-performance, lower-carbon alternative to conventional crystalline silicon (c-Si) PV panels, bolstering efforts to combat climate change.
Shares of First Solar have surged 13.3% on a YTD basis and 22.5% over the past six months.
Priced at 14.35 times forward earnings, the stock trades at a discount to its industry median and its own five-year average, respectively.
On May 1, First Solar disclosed its Q1 earnings results, which topped Wall Street’s forecasts on both the top and bottom lines. Its net sales jumped 44.8% year over year to $794.1 million, sailing past estimates by 9.5%. The company’s EPS of $2.20 demonstrated a staggering 450% annual improvement, outpacing projections by 15.8%.
CEO Mark Widmar expressed satisfaction with the company's start to 2024, highlighting strong operational performance and robust financial results. He noted that First Solar's unique technology and well-rounded business approach are facilitating growth, helping them maneuver through industry fluctuations, and ultimately delivering lasting value to shareholders.
In fiscal 2024, the company anticipates net sales to range between $4.4 billion and $4.6 billion, while EPS is projected to be between $13 and $14. Its net cash balance is forecasted to range between $600 million and $900 million, while capital expenditures are anticipated to range between $1.8 billion and $2 billion. These investments are anticipated to drive future growth and bolster First Solar's capacity to meet the growing demand for its products.
Analysts tracking First Solar expect the company’s profit to reach $13.56 per share in fiscal 2024, up 75.2% year over year, and improve another 55.5% year over year to $21.08 per share in fiscal 2025.
Plus, analysts are highly bullish on the stock. First Solar stock has a consensus “Strong Buy” rating overall. Out of the 30 analysts offering recommendations for the stock, 24 suggest a “Strong Buy,” one advises a “Moderate Buy,” and the remaining five give a “Hold” rating.
The average analyst price target of $229.85 indicates a modest potential upside of 17.8% from the current price levels. However, the Street-high price target of $356 suggests a notable 82.5% upside potential.
Solar Stock #2: Sunrun
Founded in 2007 and headquartered in California, Sunrun Inc. (RUN) provides battery storage, sells solar products like panels and racking, and offers services to commercial developers for multi-family and new homes. With a market cap of $2.6 billion, Sunrun primarily serves residential homeowners.
Shares of Sunrun have pulled back 41.5% on a YTD basis, but climbed 12% over the past month.
In terms of valuation, the stock is trading at 1.20 times sales, lower than the industry median and its own five-year average, respectively.
Despite reporting mixed Q1 earnings results on May 8, the company's shares surged by almost 7.8% in the following trading session, propelled by its better-than-expected bottom-line figure. Sunrun’s total revenue stood at $458.2 million, while its loss per share of $0.40, which narrowed 64.3% annually, smashed Wall Street’s estimates by 31%. During the quarter, the installed storage capacity reached 207.2 megawatt hours, marking a significant 192% increase compared to the 71.1 megawatt hours installed in the year-ago quarter.
Sunrun's CFO, Danny Abajian, highlighted the company's dedication to generating substantial cash through its margin-focused and disciplined growth strategy. Plus, despite facing one-time transaction costs and timing-related impacts in Q1, Abajian is optimistic about overcoming these challenges in Q2.
For fiscal 2024, management expects storage capacity installed to range between 800 megawatt hours and 1,000 megawatt hours, representing a notable annual growth of approximately 40% to 75%. For Q2, the anticipated range is between 215 megawatt hours and 225 megawatt hours, indicating a solid growth rate of approximately 105% to 115% year over year.
Analysts tracking Sunrun expect the company’s loss per share to widen by 2.2% in fiscal 2024 but narrow by approximately 41% in fiscal 2025.
Sunrun stock has a consensus “Moderate Buy” rating overall. Out of the 25 analysts covering the stock, 16 recommend a “Strong Buy,” one advises a “Moderate Buy,” 7 suggest a “Hold,” and the remaining one gives a “Strong Sell” rating.
The average analyst price target of $19.22 indicates an impressive potential upside of 70.4% from the current price levels. Also, the Street-high price target of $35 suggests that the stock could rally as much as 210%.
Solar Stock #3: Sunnova Energy
Founded in Texas in 2012, Sunnova Energy International Inc. (NOVA) has been at the forefront of the energy transition, leveraging cutting-edge technologies and sustainable solutions. The company is a leading adaptive energy services company that focuses on making clean energy more accessible, reliable, and affordable for homeowners and businesses. Its market cap currently stands at $520.7 million.
NOVA stock has plummeted 73.3% on a YTD basis, but recovered 7.3% over the past month.
In terms of valuation, the stock trades at 0.79 times sales, much lower than the industry median and its own five-year average.
Following the announcement of the company’s Q1 earnings results on May 1, Sunnova shares skyrocketed nearly 19% in the next trading session. The impressive jump was fueled by the company's bottom-line performance, which surpassed Wall Street's expectations.
The company’s revenue amounted to $160.9 million, while its loss per share was reduced to $0.57, sailing past estimates by a notable 27.9%. During the quarter, the company welcomed approximately 27,000 new customers, boosting its customer base to an impressive 438,500 as of March 31.
Additionally, Sunnova launched several strategic initiatives, such as rebalancing its capital expenditure budget and updating pricing, to boost cash generation. These efforts paid off early, increasing the unrestricted cash balance by $18.9 million in Q1. This continued progress strengthens the company's confidence in enhancing cash efficiency and fuels its optimistic cash generation outlook for 2025 and beyond.
For fiscal 2024, Sunnova projects adjusted EBITDA to range between $350 million and $450 million, while interest income is expected to be between $150 million and $190 million. With a renewed focus on core adaptive energy customers, the company forecasts adding between 140,000 and 150,000 new customers.
Analysts tracking Sunnova Energy expect the company’s loss to narrow by 6.8% year over year in fiscal 2024 and improve another 6.3% in fiscal 2025.
Sunnova Energy stock has a consensus “Strong Buy” rating overall. Out of the 27 analysts covering the stock,19 recommend a “Strong Buy,” one advises a “Moderate Buy,” and the remaining seven give a “Hold” rating.
The average analyst price target of $12.50 indicates a remarkable potential upside of 202% from the current price levels. The Street-high price target of $20 suggests that the stock could rally as much as 384%.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.