The recent passage of a $1.75 trillion infrastructure bill, which offers significant funding and tax credits for the renewable energy and electric vehicle (EV) industries, should bode well for the solar industry. The growing demand for solar power units for household and industrial uses is expected to incentivize solar companies to develop efficient photovoltaic panels, energy storage solutions, and grid-tied systems. The global solar energy market is expected to grow at a 20% CAGR to reach $200 billion by 2026.
Although ongoing supply chain bottlenecks could affect the industry’s production in the near term, rising government support should help the industry keep growing. Investors’ interest in solar stocks is evident in the Invesco Solar Portfolio ETF’s (TAN) 14.3% returns over the past six months.
Given this backdrop, Wall Street analysts recommend buying Sunnova Energy International Inc. (NOVA) and FTC Solar, Inc. (FTCI). However, they recommend that SunPower Corporation (SPWR) be avoided.
Stocks to Buy:
Sunnova Energy International Inc. (NOVA)
NOVA, in Houston, Tex., is a residential solar and energy storage service provider that offers operations and maintenance, monitoring, repairs and replacements, equipment upgrades, on-site power optimization, and diagnostics services. It operates a fleet of residential solar energy systems with a generation capacity of approximately 790 megawatts.
On November 10, 2021, NOVA and Brinks Home announced an exclusive partnership that allows NOVA to offer options from the Brinks Home portfolio of smart home security solutions and allows Brinks Home dealers and authorized representatives to offer SUN’s suite of solar, battery, and energy services to their customers. Both companies are looking forward to expanding the market for their products.
NOVA’s revenue for its fiscal third quarter, ended September 30, 2021, came in at $68.90 million, representing a 37.3% year-over-year improvement. The company had $408.16 million in cash as of September 30, 2021.
NOVA’s revenue is expected to rise 51% year-over-year to $242.82 million for the current year. The stock’s EPS is expected to grow at a 113.4% rate per annum over the next five years.
NOVA has gained 26.3% in price over the past six months. All 10 Wall Street analysts that have rated the stock have rated it Buy. The $57.10 average price target for the stock indicates a 56.2% upside potential.
FTC Solar, Inc. (FTCI)
Austin, Tex.-based FTCI provides solar tracker systems, technology, software, and engineering services internationally. The company serves project developers, solar asset owners, and engineering, procurement, and construction (EPC) contractors that design and build solar energy projects.
On November 9, 2021, FTCI announced that it had been awarded a 504 megawatts DC project, combined with 260 megawatts AC of energy storage in Arizona. FTCI will provide Voyager, its next-generation tracker producing enhanced power yields, to Moss Solar, an EPC company that received a contract from a leading Tier 1 U.S. Developer to construct the solar plus storage facility. FTCI is looking forward to gaining expanding reach in the Arizona market.
The company had $140.66 million in cash as of September 30, 2021. Analysts expect FTCI’s revenue to improve 30.2% year-over-year to $243.83 million in the current year. Over the past month, the stock has gained 7.5% in price. All four Wall Street analysts that have rated the stock have rated it Buy. The $12 average price target indicates a 37.1% upside potential.
Stock to Sell:
SunPower Corporation (SPWR)
SPWR designs, manufactures, and delivers solar panels and systems to residential, commercial, and utility-scale power plant customers worldwide. The San Jose, Calif.-based company also offers commercial roof, carport, ground-mounted systems, and post-installation operations and maintenance services. In addition, it provides residential leasing program services and sells inverters manufactured by third parties.
On October 5, 2021, SPWR acquired Blue Raven Solar, one of the fastest-growing residential solar providers. Blue Raven's growth trajectory and complementary geographic footprint will enable SPWR’s advanced solar solutions to quickly reach the solar market and serve more customers in underpenetrated areas.
SPWR’s net loss came in at $84.31 million for its fiscal third quarter, ended October 3, 2021, compared to $45.11 million in net income in the year-ago period. Its net loss came in at $0.49, versus an EPS of $0.24 in the prior-year period. The company had $268.57 million in cash as of October 3, 2021.
Analysts expect the stock’s EPS to decline at a rate of 66.5% per annum over the next five years. SPWR stock has declined 3.9% in price over the past month. Of 11 Wall Street analysts that have rated the stock, five rated it Sell. The $27.50 average price target indicates a 3.5% potential downside.
SPWR shares were unchanged in premarket trading Monday. Year-to-date, SPWR has gained 11.04%, versus a 23.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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