The winds in the broader global status quo seem to be changing once again. This time, the transition towards clean energy and solar power, in particular, has been the talk of the town. With stocks collectively facing a broader slump in prices, some of the best solar names are trading at a significant discount. With the inevitability of solar taking the lead in the clean energy race, the present climate is extremely encouraging investors looking to go solar. Moreover, the upside potential for solar energy, given its relatively low adoption rate, is immense. With the cost of solar panels continuing its downward descent each year, the viability of solar, in comparison to fossil fuels becomes ever more compelling. For this reason, we present a list of the top five stocks from the solar industry, in no particular order, that are great picks for investors looking for the best solar stocks.
The first stock we present is Sunrun Incorporated (NASDAQ: RUN). Sunrun turned heads this month when it shot up from $23 to $31 in a single day, the largest jump of any alternative energy company throughout the week. This boost came immediately following the announcement by US senate democrats to deliver $60 billion in subsidies to American clean energy companies. The instant price boost for RUN indicates how the market perceives the company to be extremely well-positioned to capitalize upon this bill.
Of the $60 billion, the bill allocates $50 billion toward companies that both operate and manufacture within the United States. Sunrun fits these criteria quite well, which explains the market’s optimism toward it. In fact, the company’s positioning has enabled it to capitalize on similar subsidy programs in the past, operating at local, state, and federal levels. As a result of this, Sunrun saw its annual revenue shoot up from $860 million in 2019 to over $1.6 billion in 2021. Analysts expect this figure to cross the $2 billion mark in the current year.
Last year the company acquired Vivint Solar, which led to the creation of substantial synergies, and has massively accelerated its path towards a more widespread approach to solar adoption. Sunrun stands ideally positioned to see its growth take a rocketing acceleration as a result of the announced subsidy programs. There is no better company that fits the metrics of the benefiting companies, signaling an ideal investment opportunity for the market to look towards.
Second stock on our list of top solar stocks is, yet another winner from the solar space, SunPower Corporation (NASDAQ: SPWR). Being a domestic, American solar energy provider, SunPower too stands to win big as a result of the subsidy bill announced in the US Senate. What makes the stock special is that it benefits another major legislative tailwind that most other solar stocks do not see exposure to. This is the $280 billion spending announcement on the microchip industry, which SPWR is well integrated into. This bill, which was announced in February 2022, aims to support US-based microchip manufacturers. Of this $280 billion, $3 billion aims at ensuring American manufacturers are less reliant on Chinese solar components. These are precisely the type of components that Sunpower specializes in.
SunPower’s performance has been spectacular, even without considering these heavy tailwinds. In its most recent quarterly earnings, the company reported sales of $414 million against the analyst expectation of $362 million, which reflected an incredible 63% year-on-year growth. Moreover, SunPower added a record 19,700 customers during the quarter, which was a surge of 51%.
Additionally, SunPower signed a partnership agreement this year with Ikea, the giant furnishing conglomerate, to provide solar products within its California locations. A partnership with a big name brand such as Ikea would give the emerging solar company significant exposure in a highly lucrative market. In addition to the revenue boost, it also is likely to accelerate its expansion.
Given these fundamental metrics, as well as the external opportunities presented, SunPower is clearly a rising star in the solar world. The earlier a position on this stock is locked in, the more incredible the growth one can expect.
Thirdly, we present the Israeli-based solar company SolarEdge Technologies (NASDAQ: SEDG). SolarEdge stands apart from its peers given the explosive market growth it has enjoyed in recent years.
The company primarily serves the North American and European markets, as well as what it considers to be the rest of the world or R.O.W. This R.O.W category had, by far, seen the most explosive growth since 2017, from which it grew by over 500% till the present date. The most popular markets within this category cover Japan and Taiwan, indicating its successful market penetration in some of the most competitive markets of the Asia-Pacific.
In terms of revenue growth, SolarEdge clearly holds one of the top positions in comparison to its peers. With annual revenue growth of over 50% and a 5-year compound annual growth rate of 35%, the stock is fiercely competing for the top spot. The company also reports some of the lowest levels of debt, in comparison to its competitors, leaving little that bogs down its growth trajectory.
In the solar race, SEDG is a name that has proven by many metrics to take the lead against its competitors. These fundamental metrics which deliver the company a substantial market advantage ensure its rise to the top solar stocks. For this reason, SolarEdge is not a stock to take lightly.
Brookfield Renewable Partners
Next up on our list, we present the Bermuda-based solar company, Brookfield Renewable Partners (NYSE: BEP). The company is essentially structured similar to a REIT and has built up a portfolio of renewable power-generating facilities. These are located across North, Central, and South America, as well as Europe, China, and India. Solar energy makes up a significant portion of this portfolio, making it ideal for investors seeking exposure within this domain. This diversified exposure to so many lucrative markets makes the stock a largely safe investment, amid macroeconomic challenges. It also makes the company’s net wide enough to benefit from the trillions of dollars globally injected into the clean energy transition.
Brookfield Renewable saw its funds from operations rise to $243 million in the most recent quarter, which translates to year-on-year growth of an impressive 18%.
Another aspect that makes BEP great is its inherently inflation-proof financial structure. Almost three-quarters of Brookfield’s revenue is indexed to inflation, given the nature of its contracts. It also holds 98% fixed-interest financing, making it immune to the present interest rate hikes and volatilities. To add to the attractions of BEP, its dividend yields at 3.75%, with management aiming for up to 9% dividend growth.
BEP is, by many metrics, a thing of beauty. The stock offers exposure to one of the most promising and fast-growing domains of the future. Despite such dynamic exposure, however, it remains safe against macroeconomic volatilities and inflationary pressures. All this while still paying shareholders a decent dividend which makes it a top solar stock. This stock is a win-win by every standard.
First Solar Incorporated
The final stock on our list is America’s largest solar manufacturer, First Solar Incorporated (NASDAQ: FSLR). In just the last month, FSLR jumped from being a $70 stock to a $120 stock. Owing to tailwinds that have been rallying investors towards the best-performing solar stocks, First Solar is currently trading at an almost year-long high.
FSLR had faced its fair share of challenges in the prior 12 months. This primarily links to inflationary pressures and supply chain complications owing to Russia’s invasion of Ukraine. However, as many analysts claim that inflation levels have peaked, things once again look promising for First Solar.
First Solar operates at an international scale and serves most of the world’s lucrative markets. As a result, it is likely to go a long way given the sheer amount of tailwinds that have been propping up in support of the industry. The recent subsidy program worth $60 billion for American clean energy providers is just a single example. Moreover, the European Union has proposed to pass legislation for a 40% adoption of renewables, as a means to combat oil inflation. Similarly, giant markets such as India have also dramatically increased solar installations across residential and commercial sectors. Analysts expect FSLR revenues to jump to over $3.4 billion by 2023.
FSLR is a stock that had suffered a rocky past in recent years. However, the changing winds offer a fresh opportunity for the company to excel significantly.
Solar energy has always been a promising domain. Recently, however, the potential of this critical area has seen a growing prominence. Solar stocks no longer reflect a distant dream of a clean energy setup but are rather accelerating toward a takeover of the mainstream. The solar industry has some heavy tailwinds supporting its rise, including subsidy bills, and a push away from oil reliance. Each of the stocks mentioned in this article is uniquely positioned to tap into the global opportunities presented by solar energy.