What are the best solar stocks to own? Well, there are a lot of solid stocks to choose from in 2021. In this article we examine the best solar stocks to buy!
The solar energy industry is growing exponentially. Across party lines in the United States and especially in the international sector, the move toward renewable energy is becoming more mainstream and solar stocks could be set to benefit!
The statistics are undeniable. According to the International Energy Agency, global renewable energy grew by 1,200 gigawatts over the last five years.
And 60% of that energy growth is attributed to solar energy (1,200 gigawatts more than exceeds the average peak grid demand for the entire US).
Here are some other facts you should know about the industry.
- By 2026, the global solar industry is projected to be worth $223.3 billion.
- The cost of solar energy has plunged 90% over the past decade.
For a 50-foot view on the industry, over the last decade alone, solar energy has witnessed an average annual growth rate of 49%.
This growth is directly linked to strong federal policies like the Solar Investment Tax Credit.
Plus, rapidly declining installation costs and increasing demand across the private and public sectors for clean electricity.
There are now more than 85 gigawatts (GW) of solar capacity installed nationwide, enough to power 16 million homes.
Why Solar Stocks Should Be On Your Radar
If these numbers were not impressive enough for you, consider the implications of solar power on the job market. The solar industry is just flat-out putting more people to work, which is another sign of a robust sector.
At the end of 2019, a quarter of a million Americans worked in solar, while the sector generated $18.7 billion in investment.
What was the catalyst? Well, the tax credits had something to do with it, but falling equipment and infrastructure prices have also made a huge difference.
An average-sized residential system has dropped from a pre-incentive price of $40,000 in 2010 to roughly $20,000 today.
A few years ago, solar power was only really available in sunny states like California and Florida. Today, solar power is available in most US cities and states.
While most of these numbers above reflect residential growth, solar power has also helped Fortune 500 companies save money.
Apple, Amazon, Target, and Walmart have all invested heavily in solar facilities at various locations across the country.
Apple is leading the way with more than 390MW of commercial capacity and Amazon close behind with 329 MWs.
So, if you are convinced in the growth of solar energy, let’s look at the best solar stocks to own right now.
Best Solar Stocks To Buy
Now, before we talk about stocks, let’s go over a few of our ground rules about the industry, as well as the stocks we are focusing on and why.
First, not every solar company is built to make money for shareholders. Some of these companies are staying afloat on subsidies or money from venture capitalist dollars which is why its so important to do a through analysis before jumping in.
There are also some companies that dabble in solar energy or own subsidiaries in the solar power industry, but we are mostly focused here on solar stock pure plays.
Best Solar Power Stocks
Invesco Solar ETF (TAN)
The first commodity we’re going to discuss isn’t actually a stock. The Invesco Solar ETF is a fund that tracks the performance of 37 different companies in the solar energy space.
The Invesco Solar ETF is a great way to invest in the solar industry without investing in just one stock. Over the past year, the fund has reflected the huge boom in solar power.
The fund reached a peak in mid-February 2021 and has dipped slightly since then. However, this is a great time to buy the dip. Solar power isn’t going anywhere anytime soon, so we can expect to see growth continue in the long term.
First Solar, Inc. (FSLR)
First Solar is one of the most prominent solar companies on the market right now. They manufacture solar panels and offer support and maintenance for solar power operations.
The company was founded in 1990 and has built a very stable client base during their 30 years in the business. Unlike many burgeoning solar companies, they have a rock-solid balance sheet that can handle the challenges of an economic downturn.
Despite the challenges of COVID-19, First Solar performed very well in 2020. They had a backlog of orders throughout 2020 and their share price increased dramatically, peaking in December 2020.
However, their stock price has dipped slightly in 2021, which means that now is a great time to buy at a reduced price point. The company’s most recent earnings report was a positive one, beating both earnings and revenue estimates.
This industry leader isn’t going anywhere anytime soon. This is a company you’ll want to have in your portfolio for the long term.
SolarEdge Technologies, Inc. (SEDG)
SEDG is an Israeli company that provides optimizers, inverters, monitoring equipment, tools, and accessories for power harvesting, conversion, and efficiency of solar energy.
Europe is a big area for SEDG. The company has done well marketing across the EU and the continent accounted for $144 million in revenue. Which actually represents a revenue increase of $22 million from last quarter.
The American marketplace has more competition, but SEDG has shown itself adept at making hay in Europe.
SEDG has an attractive valuation for a company that is operating in 30 markets, and SEDG’s technology has become some of the most respected in the industry.
Furthermore, SolarEdge has done a fantastic job of reinvesting in the business, which is why its technology is ranked #1, especially in the case for inverters, where it is heads and tails the market leader.
We think this company could continue to perform well in the US. The Biden administration has committed to investing in renewable energy, which bodes well for SolarEdge.
SEDG makes it into one of our best solar stocks list because its technology is strong and will certainly make it a market leader for some time.
Best Solar Stocks To Buy
Enphase Energy, Inc. (ENPH)
We love this stock. Any stock that makes the nuts and bolts of growing industries like renewable energy—which we think has an excellent chance of growing even bigger as ESG investing expands into more hedge funds and big banks.
But ENPH sells a home solar unit that runs through an Enphase microinverter, which not only converts the power but tracks the energy data. These products have been selling like hotcakes across North America.
Now these microinverters are going to Europe and Australia. From a recent press release: “With a maximum output power of 366 volt-amperes (VA) and 96.5% EU efficiency. Enphase IQ 7A microinverters can generate up to 14% more power than any previous Enphase IQ microinverters. IQ 7A microinverters are software-defined.”
These microinverters are best in class. Potential shareholders should be looking to ride the wave on these babies. This solar stock has legs based on this product alone, but management is ambitious and one of the best in class.
Lastly, we think this is one of the better solar stocks on this list because it is more of a processor or semiconductor company than a pure solar company laying panels out in the field and ringing doorbells. This company is booking revenues over 90% YoY and operating income is skyrocketing.
Sunrun Inc. (RUN)
Sunrun is more of your typical solar energy company. It manufactures, installs, and sells solar panels to residential solar energy customers.
On that alone, the company is not too exciting. But they recently just purchased Vivint Solar with an all-stock transaction.
“This is a transformational opportunity to generate consumer and shareholder value, realize annual cost synergies and bring cleaner, affordable energy to more homes,” Sunrun said in a news release.
The company’s market cap is now over $9 billion. Its stock price has increased from $14 at the start of the year to now $71, a 400% increase YTD.
RUN is exciting Wall Street stock traders. The company entity increases the customer base to half a million customers and an estimated $8,000 in value per customer.
The Largest Residential Solar Company
Why this deal was not flagged for anti-trust reasons is honestly beyond me. These are the #1 and the #2 residential solar companies on the market. This deal creates a mega-company and it is as close to as a monopoly as you can get in residential solar.
With Vivint now on the same team, Sunrun will raise prices and gain technology that it did not have before. They’ll also be able to expand their sales team and cover more ground.
“Joining forces with Sunrun will allow us to reach a broader set of customers and accelerate the pace of clean energy adoption and grid modernization,” Vivint CEO David Bywater said.
SunRun stock recently popped after several days of dropping off. This volatility appears to be a result of analysts changing their recommendations about the company. It appears that SunRun stock is now in a good position to buy.
Brookfield Renewable Partners (BEP)
Brookfield is a Canadian renewable energy company with operations around the world. They have a diverse portfolio that includes solar energy as well as hydropower and wind power.
Diverse streams of income are good for any business, because it means they’re not relying specifically on one product or service to keep their balance sheet steady.
Solar energy is a relatively new part of Brookfield’s business, but it’s something they’re investing in heavily. They recently completed a deal with a utility company called Exelon to acquire a huge stream of solar power across 600 solar sites in the US.
A large portion of the projects that Brookfield has in development right now are solar projects. This is because solar projects are relatively affordable to develop and can generate huge financial returns over time.
It’s also important to note that Brookfield is a good dividend stock. They currently have a dividend yield of 4.77 percent.
Best Solar Stocks: Conclusion
These are some of the best solar stocks on Wall Street right now.
There is plenty of upside in the sector and plenty of room for growth. Overall, solar energy only accounts for around 2% of the total grid usage right now. That number is primed to go up.
The current political climate in the US also bodes very well for solar companies. Democrats have been wanting to position the US as a leader in green energy solutions. With the Biden administration in the White House and Democrats controlling both branches of Congress, things are looking good for solar energy right now.
Climate change is a very important global issue right now. We can expect to see solar stocks go up in price even more over the next few years as more residential and commercial properties switch to solar power.