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Global warming and population growth have long been at the forefront of discussions among world leaders. The increasing demand for clean energy has led to a myriad of programs to help boost green energy production. One of the most popular sources of green energy, solar, has been growing exponentially over the past decade and is expected to continue that trend going forward. The global solar power market is expected to reach $368 billion by 2030, and companies around the world are rushing to take the top spot in the race for a carbon-free future.
This global energy shift has attracted a lot of investors over the years - investing billions of dollars and buying up stocks in promising solar energy companies.
2022 has proven to be a very challenging year for the stock market, and solar energy stocks have struggled to deliver on their hefty growth promises. However, the industry is still far away from reaching maturity, which is why investors are hopeful of a gradual turnaround starting from 2023 onwards.
If you are interested in investing in promising solar energy stocks, but unsure where to start - this investfox guide is for you.
Before discussing the best solar energy stocks to invest in this year, we must first understand the unique advantages and disadvantages of solar energy stocks to decide whether they can be a welcome addition to our stock portfolios.
The stock market is home to dozens of renewable stocks and choosing between them can be an issue for inexperienced investors. Some solar energy stocks are startups that have only recently entered the market, while others are industry-leading, diversified energy companies that generate billions of dollars in annual revenues.
SolarEdge Technologies produces low-cost power optimizers and inverters that convert DC power produced by the sun into AC power used by the grid. SolarEdge has achieved much success thanks to its low-cost alternative to conventional microinverters produced by competitors.
SolarEdge is heavily investing in its capabilities to increase production output by developing existing products to increase its average revenue per installation.
SolarEdge is a profitable business with growing quarterly revenues. The company also boasts a strong balance sheet, which is essential for attaining the growth projections set by the company’s management.
While the 2022 bear market has been challenging for renewables, SolarEdge has managed to bounce back in a major fashion since October of the same year. The stock price has risen by roughly 50% between October 2022 and February 2023, which could deter some investors from buying the stock at current valuations. However, most analysts do not believe a market boom to be on the cards for 2023, which could present better opportunities to buy SEDG stock at a discount later this year.
The company has plans to invest more in the acquisition of UPS and EV charging systems, as well as grid service solutions, which could increase SolarEdge’s market reach in the long run.
"SolarEdge is a global leader in Smart Energy Products, started in 2006 by developing what we call “DC optimized inverter solutions” which revolutionized the way energy is harvested from solar panels" - Christelle Barnes
First Solar is one of the largest solar energy companies in the world, which develops, manufactures, and sells advanced solar modules using proprietary thin-film technology.
The solar panels produced by First Solar are able to perform better in more challenging conditions when there is less sunlight and the temperatures are higher. First Solar’s panels are also larger in size when compared to competitors, which reduces the cost-per-watt for operating them.
In terms of finances, First Solar has had a challenging year in 2022. The annual report from the year is yet to be released, but the company was unprofitable in two of the three quarters of the year. However, this does not deduct much from the company’s robust balance sheet, which is stronger than most other companies in the solar industry. First Solar has plenty of cash and comparatively less debt, which puts the company in a great spot to fuel growth without having to overleverage itself.
Overall, First Solar is one of the most promising solar energy stocks on the market, which has grown considerably since the start of 2022. First Solar’s stock price has more than doubled within the one-year period and could present solid buying opportunities throughout 2023.
"We've got a great product with a great technology and we want to focus on delivering against those commitments" - Mark Widmar
SunPower Corporation has been one of the most successful solar energy companies in recent years. The company produces a full range of integrated solar, storage, and home solutions for households and businesses, alike. The company primarily operates in the United States and Canada. The solar panels produced by SunPower are currently some of the most efficient solar arrays on the market.
While 2022 has been a volatile year for most stocks, SunPower‘s stock price started to stabilize throughout the year. 2021 saw a huge spike in the company’s share price, which was followed by a sharp correction in 2022. The company has remained adamant about pursuing profitability as soon as possible, and the third quarter financial results from 2022 show a net income figure of $139.4 million.
SunPower is a stock with ample room for growth and a relatively modest valuation, especially when compared to the all-time highs reached by the stock in 2021. At an even lower valuation, SunPower could be one of the best value plays among solar energy stocks on the market, as the company has a healthy balance sheet with over half a billion dollars in shareholder’s equity, which is always a welcome sign for prospective investors.
Analysts estimate the consolidated financial statements for the year 2022 to reach $1.7 billion.
"As the new CEO [!of!] we are going to serve customers so well
and work with our dealers so well that customers are going to be delighted" - Peter Faricy
BrookField Renewable Partners LP is a part of the BrookField Asset Management (NYSE:BAM) holding and includes diversified investments in renewable energy companies. This includes a fair amount of solar energy companies, such as Urban Grid, which the company purchased in 2022, which develops utility-scale solar energy storage. Brookfield has been investing more and more into solar energy, as the partnership sees more potential in the industry.
For instance, the company expects a 9% annual growth rate per year from future solar energy acquisitions. These acquisitions would be in line with the partnership’s plan to increase its dividend yield from 5% to 9% over the next few years.
While revenue growth remained strong throughout 2022, the company experienced net losses in the short term. However, the company maintains a solid balance sheet and a promising portfolio of solar energy companies that have ample room for long-term growth.
BEP could be a solid option for investors who wish to invest in a company that owns a diverse portfolio of solar energy and related companies.
BEP’s stock price has been on the decline since the start of 2022, shedding around 25% of its market value over the one-year period. That could present solid points of entry for new investors that are bullish on solar energy in the long run.
"The economies are slowing around the world, there's no doubt. But these businesses that we own are long-term cash flow generating businesses and we look at them over a decade into the future." - Bruce Flatt
Sunrun is a company that is engaged in the design and development of home solar energy systems across the United States. Sunrun is the largest solar energy company in terms of home installations and also has a pipeline of battery storage units across the country.
The tough macroeconomic climate of 2022 had put a dent in Sunrun’s supply chain, which now seems to be improving. The company has a fairly decent balance sheet and has been able to generate profit even in 2022. Sunrun also benefits from a large interest from hedge funds, with at least 47 hedge funds holding a stake in the company. This interest could indicate that institutional investors are confident in Sunrun’s ability to drive growth in solar adoption across U.S. homes in the coming decades. Orbis Investment Management is currently the largest institutional shareholder of Sunrun.
Performance-wise, Sunrun’s stock has not had a stellar year. The stock has shed over 30% of its market value since the start of 2022. A further decline in price could indicate solid buying opportunities for long-term investors in 2023.
"I started Sunrun because I love the planet I was working in China and I was shocked by the pollution there I knew I wanted to have kids one day and I was convinced that this is the biggest problem of our generation to solve so I was committed " - Lynn Jurich
Enphase Energy is a solar energy company that is engaged in the development and manufacturing of microinverters, solar panels, and energy storage systems for residential and industrial applications. The company’s products are available globally, with the company being present in 21 countries around the world.
Enphase Energy has the largest hedge fund interest across the solar energy market, with 59 hedge funds investing in the stock. Emphasis’ global outreach, as well as solid financial performance, have been the key catalysts for the company’s recent performance.
In terms of financial results, Enphase Energy managed to weather the 2022 storm quite comfortably as the stock price doubled throughout the year. However, the start of 2023 has seen the stock drop off significantly, losing 30% of its value over the past six months.
Assuming the stock falls lower throughout 2023, Enphase Energy could be one of the best buying opportunities across the solar energy market, with solid financial performance and plenty of interest from institutional investors to boot.
"The demand and the key take away here is that, and the reason why Amazon's of the world did as well, was the the fundamentals, the
underlying demand was always there, it was very very strong and I believe that's the case with solar as well" - Raghu Belur
Altus Power is a U.S.-based solar electrification company that manufactures and operates photovoltaic storage systems. Altus Power also has a number of renewable energy certificate initiatives across the United States.
Altus Power enjoyed a year of growth in 2022, with the stock price increasing by over 70% throughout the year. However, similarly to Enphase Energy, Altus Power has begun a gradual decline since the start of 2023 - falling below the beginning price of 2022.
However, despite the weak stock performance, Altus Power has plenty of institutional investors backing the company, with over 30 hedge funds maintaining a stake in Altus Power.
In terms of financial performance, Altus Power has had a mixed year in 2022. While the quarterly revenues continued to increase, net income remained inconsistent, with Q3 showing a $97 million loss for the period. However, Altus Power is a high-growth company and short-term troubles are not likely to scare away long-term investors.
"Altus is a clean electrification company. We come to buildings and bring with us clean energy generation systems, like solar arrays and battery storage. Altus is different from our competitors because we control every step of the chain, from introducing a clean energy system onto a building, constructing it, and then owning and operating it for term." - Lars Norell
Sunnova Energy International is a solar energy company that is present in over 25 states and territories and provides solar installations for residential and commercial applications. Aside from this, Sunnova Energy also provides maintenance, monitoring, repairs and replacements, equipment upgrades, as well as on-site optimization. The company has roughly 200,000 subscribers in total.
As for stock performance, Sunnova Energy has been a mixed bag throughout the bulk of 2022 with dramatic ups and downs being a frequent occurrence. In total, the company has lost around 15% of its market value since the start of 2022, which worsened in 2023. However, the volatility caused by market uncertainty has not been enough to deter institutional investors from choosing the stock, which has still grown by 50% over the past five years - trading far below its all-time high of January 2021.
The company’s finances had also come under a lot of stress in 2022, which could start to look up as markets dissect the steady interest rate hikes throughout 2023. Overall, NOVA will need to work harder on becoming profitable to attract more investors toward its stock and accelerate growth in 2023.
"The single best thing that a consumer can do in this economy is to sign up for solar service from a company like ours [!sunnova!]. You can lock in energy prices for the next 25 years." - John Berger
Most solar energy stocks started 2023 with declining stock prices. However, there have been some key exceptions as well. While analysts do not expect a broad market turnaround in 2023, solar energy stocks could provide solid opportunities at discounted prices.
2023 is unlikely to be a booming year for the stock market, which is why analysts are sending cautious buy signals to prospective solar energy investors, as these stocks could fall further in price throughout the year.
Enphase Energy has generated the most interest from hedge funds and has managed to remain profitable, despite supply chain issues in 2022. The stock is among the few investor favorites in 2023 as well.