The global solar industry has been performing in a top-notch manner, even prior to the boost that the Covid-19 phenomenon brought to it. Federal policies such as the Solar Investment tax credit, and wider initiatives such as the Paris Climate Agreement have catalyzed the growth of this rising giant. According to the Paris initiative, the global target for 2030 has been set at 5200 Gigawatts, whereas the standard for 2040 is at 14000 Gigawatts. All this comes as a spark for the global solar market, which is already enjoying tailwinds from its consistently declining costs of production.
The most recent catalyst to drastically accelerate the growth of the solar industry is the Inflation Reduction Act, signed by President Joe Biden in mid-September. As part of the Act, a further $369 billion is being allocated to domestic renewables. In light of this, solar stocks seem to be in high demand among market participants. For this reason, we bring to you a list, highlighting five top solar stocks that are worth investing in.
Canadian Solar
The first stock on this list is the global solar champion, Canadian Solar (NASDAQ: CSIQ). Canadian Solar is one of the top names in the global solar markets, and it has structured itself in a manner so as to capture value at various levels of the segment.
The company holds two core business segments, demonstrating world-class expertise in each. Canadian Solar’s first business segment is its manufacturing and installation one. This gives CSIQ exposure to long-term recurring revenue, especially since it offers service and maintenance agreements. At present, the company is dealing with over 3.1 gigawatts of operations under the segment, which management claims will surpass 20 gigawatts by 2026.
On the other hand, Canadian Solar operates its global energy segment, which deals in the project management domains. Through this, the company develops, builds, and sells large-scale solar-power projects around the world. These projects range from develop-to-sell, build-to-sell, or build-to-own. The aforementioned exit strategies give CSIQ the flexibility to maximize its return. The pipeline of these projects presently totals up to 26 gigawatts of solar power.
As a result of this robust business model, which gives the company a significant competitive edge, CSIQ has been flying high in terms of its financial performance. In its most recent quarterly report, the company saw its net income grow explosively by a staggering 572% on a year-on-year basis. For these reasons, CSIQ should be at the forefront while looking at the solar stocks to invest in.
Maxeon Solar Technologies
The second solar stock we present is the Singapore-based Maxeon Solar Technologies (NASDAQ: MAXN). The strength of this stock can be gauged by its price rise alone, which in the last six months amounted to almost 80%, whereas the S&P 500 declined by 14%.
Like most players in the global solar industry, Maxeon too enjoys the strong tailwinds of opportunity and stands ready to climb high. However, there is much about this company in particular that makes it a difficult one for investors to ignore. Although it is a small-cap company valued at only $1 billion and is still in its negative EPS phase, its forward-looking prospects are extremely bright. For one, it recently renewed its contract with US photovoltaic specialist, SunPower which would enable it to continue supplies to the US and Canada until October 2023. Similarly, the company also penned an agreement with TotalEnergies to supply the company’s Danish Fields project in Texas with 400 megawatts of ultra-efficiency solar modules. Both these deals provide a substantial growth boost to the young company aiming to establish itself as a global leader.
Furthermore, Maxeon Solar is excessively focused on driving down its solar panel costs through these strategic partnerships, which would enable it to gain a strong foothold in the North American markets. It also has finalized plans to establish a multi-gig solar production facility within the United States. This is a highly strategic move considering the legislative incentives the industry faces in the country.
The final cherry on top for this high-growth emerging star is its financial performance. In its recent most quarter, Maxeon saw topline growth of 35%, indicating its success within the market it operates in. This is not a stock to take lightly for those seeking the gains of the lucrative world of solar.
Array Technologies Inc.
Next up we take a look at Array Technologies Inc., (NASDAQ: ARRY) a company that develops solar tracking systems that are essential to the optimization of solar projects on a utility-scale. The company was off to a dismal start since its IPO last year, given a price plummet that was caused by market-wide uncertainty in the wake of the post-Covid slowdown.
Fast-forward to September 2022, ARRY appears to be in full-blown recovery mode, as a result of a number of wider factors. For one, the inflation reduction act, and similar policies issued by president Biden have changed the dynamics and prospects of the wider industry to a substantial degree. Secondly, Array’s solar tracking system, which adjusts panel placement in real time to face the sun, is seeing an influx in demand, given the energy optimization the concept promises. Finally, the prices of steel, which are a primary component of Array Technologies’ products offer wider profit margins and bottom-line growth.
Given the shift in the playing field, ARRY has more than doubled its quarterly revenue in June 2022, from $197 million to $425 million, on a year-on-year basis. The wider market also appears to be confident in its prospects, considering its 36% climb in the bearish six months prior. It is evident that ARRY has good times ahead, hence making it a prime investment candidate for solar stocks would be a good choice.
Enphase Energy Inc.
The fourth solar stock we turn to is Enphase Energy Inc., (NASDAQ: ENPH) an American photovoltaic player working in the home energy solutions market. Although its stock has seen a price doubling from $152 to $305 in the last 12 months alone, it has a substantial growth runway ahead of it. In just the last 12 months, ENPH saw its revenue climb by 64%, whereas its earnings grew by 13%.
The biggest opportunity that Enphase faces come from Europe, just as the company is on the verge of expanding to international markets. Given the tensions that currently exist between the EU and Russia, the entire European continent is on the verge of an energy crisis this oncoming winter, which could prove devastating to tens of millions of citizens in a number of countries. Amid such circumstances, solar-powered home energy solutions, as Enphase Energy offers could very well be the hero of the moment and face skyrocketing demand.
Enphase Energy, following the acquisition of key American companies, has vastly expanded its installation and integration network, which allows it to meet demand at a global level. Its various manufacturing facilities in India, China as well as Mexico demonstrate the robustness of its distribution network and supply chain. Its very next manufacturing facility comes in Romania, which will launch later this year, indicating the company’s ambitions in the European continent.
Given the oncoming opportunity in Europe, and potentially the world, Enphase is optimal for the capture of market share to a major degree. Its product pipeline appears to be one of the most promising in the solar competitive space, offering home power management tools, and solar-based solutions fit for homes as well as small businesses. The stock, for these reasons, is definitely one to keep on your radar among other solar stocks.
Daqo New Energy
The final stock on this list is the China-based, global world leader, Daqo New Energy (NYSE: DQ). Daqo, along with its subsidiaries is a producer and supplier of polysilicon, the most critical component that goes into solar panels. The company, given its substantial cost advantage, occupies a 13% share of the global polysilicon market.
In just the last decade, Chinese companies have excelled substantially within this domain, pushing their European counterparts off their positions in market leadership. At present, the top 3 polysilicon players are all based in China, with Daqo being the largest player of them all, with rocketing growth.
The company’s revenue from 2019 to 2021 stood at $350 million, $675 million, and $1.7 billion respectively. Analysts place their revenue consensus estimate for 2022 at a staggering $4.4 billion mark. Such explosive fundamental growth indicates possible domination of the solar markets, owing to its successful cost leadership, which competitors are unable to match. Similarly, earnings per share during these three years exploded from $0.43 to $21.50 a share.
Despite such strong fundamental prospects, the DQ price has barely changed in the last 12 months, signaling a possible undervaluation of a substantial degree. The fact that the company’s forward PE ratio stands at 2.7, compared to the wider sector average of 16.7 further reinforces this view. DQ, therefore, is a great opportunity for those seeking both value and growth in solar stocks.
Conclusion
There appears to be agreement amongst all classes of investors that the next big opportunity exists within the world of solar. With so many tailwinds supporting it, and a number of policy incentives, its hard to not sway toward the investing opportunities that solar power offers to the world at large. As costs continue to decline, and countries strive to attain self-sufficiency, in terms of energy, the industry as a whole is likely to reach new heights, which will eventually challenge the mighty fossil fuel industry. Each of the solar stocks mentioned in this article allows investors to be a part of the booming rise the industry is on the verge of experiencing.
