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US-China Trade War Dissipates: 3 Solar Stocks in Focus
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The U.S. stock market took a hit last week as chances of a possible trade war between America and China were rife. However, on Mar 26, possible talks between the United States and China over tariffs and trade imbalances started making the rounds. This helped the Wall Street gain some lost ground.
What Led to the Possible Trade War?
President Trump’s latest announcement of a possible imposition of a $60-billion tariff on the products imported from China dealt a huge blow to Wall Street last week. Subsequently, China announced to impose an import tariff worth $3 billion on U.S. goods. Per The Washington Post, owing to such formidable announcements, the stock market witnessed one of the worst weeks in years.
Trade relations between the two nations have failed to remain cordial, thanks to Trump’s latest policies. He pledged to reduce the U.S. trade deficit with China and demanded that China must cut the same by $100 billion. In addition to steel and aluminium, tariffs have also been imposed on imported washing machines and solar panels. These are likely to affect China’s economy adversely.
Analysts are of the opinion that Trump’s decisions will not go down well with China and the nation in retaliation may impose tariffs on import of American aircraft as well as U.S. crops since it is one of the biggest buyers of U.S. crops. Given these developments, two of the world’s key economies were almost at the brink of a trade war.
Current Scenario
Following Treasury Secretary Steven Mnuchin’s announcement that the two nations have decided to enter into negotiation talks to avert the trade war, the stock market opened on a fairly upbeat note on Monday. According to a report by The Wall Street Journal, China and America have started arbitration to improve United States’ access to markets in China, which cover wide areas like financial services and manufacturing.
Trump’s letter to China’s economic czar Liu late last week requested for a reduction of Chinese tariffs on U.S. automobiles, more Chinese purchases of U.S. semiconductors and greater access to China’s financial sector by American companies. The news came as a breather to investors as a possible aversion of the trade war seemed to be in the cards. Evidently, the S&P 500 rose 2.7%, Dow Jones Industrial average jumped 2.8% and Nasdaq moved up 3.3%.
Implication of the 30% Tariff on the Solar Industry
In January 2018, Trump administration announced a new import tariff on solar panels and modules, per which, 30% tariff will be levied on solar panel components. In four years’ time the tax rate is expected to come down to 15%. Initially U.S. solar stocks moved up on hopes that such trade restriction will create jobs for the Americans. However, with the passage of time the solar industry’s growth did not sustain as investors became skeptical over the long-term success of the tariff.
This is exactly what the U.S. solar industry advocates feared. The U.S. Solar Energy Industries Association predicted that the tariff may cut forecasted solar installations this year by nearly 20%, to 9 gigawatts from 11 gigawatts, and lead to the loss of 23,000 jobs in the United States, the world’s fourth-largest solar market after China, Japan and Germany.
This is because the U.S. solar market depends largely on imported panels. According to a report by GTM research, 87% of U.S. solar installations used foreign-produced panels, in 2016, primarily from China. So levying a tax on these imports is unlikely to benefit solar stocks.
Per the latest Solar Market Insight Report, solar installations between 2018 and 2022 will be 13% lower than the original forecast, primarily due to U.S. tariffs on panel imports. In fact, U.S. solar installations are unlikely to reach the peak level of 2016 (15.2 gigawatts) until 2023.
Thus, despite the growing demand for solar panels, the prospects of the U.S. solar industry seem to be bleak due to the tariffs. However, with the United States and China now willing to enter into talks for improving trade relationship, there remains a possibility that the two nations might arrive at a mid-way solution for solar energy.
Stocks in Focus
The recent thaw in the two countries hostile relationship is likely to lead to new trade policies for solar panel imports. Thus, we have zeroed in three U.S. solar stocks that investors might want to retain in their watch list. These stocks not only carry a favorable Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) but also boast a solid earnings surprise history. You can see the complete list of today’s Zacks #1 Rank stocks here.
These stocks have also managed to outperform the broader market over a year and flaunt a solid long-term earnings growth rate, thereby reflecting their inert strength to perform favorably in the future as well.
SolarEdge Technologies, Inc. (SEDG - Free Report) provides innovative solar power harvesting and monitoring solutions for residential, commercial, and utility-scale solar PV installations. It sports a Zacks Rank #1.
The company boasts a solid long-term earnings growth rate of 24% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarters by an average of 31.9%.
Over a year, SolarEdge Technologies’ shares skyrocketed 269%, compared with the S&P 500 index’s gain of 10%.
First Solar, Inc. (FSLR - Free Report) designs, manufactures and sells solar electric power modules using a proprietary thin-film semiconductor technology. It carries a Zacks Rank #3 (Hold).
The company boasts a solid long-term earnings growth rate of 10% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarters by an average of 535.9%.
First Solar’s shares surged 161.7% over a year, compared with the S&P 500 index’s upside.
Sunrun Inc. (RUN - Free Report) develops, owns, manages and sells residential solar energy systems across the United States. It carries a Zacks Rank #3.
The company boasts a solid long-term earnings growth rate of 12% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarter by 17.6%.
Over a year, Sunrun’s shares gained 71.8%, compared with the S&P 500 index’s rally.
What’s Ahead?
Trump has always been favoring the usage of coal and has termed the need for alternative energy sources as a 'Chinese hoax'. However, with renewables being the fuel of the future it goes without saying that the U.S. government can not stay away long from harnessing the same. With the recent thaw in the two countries hostile relationship, on account of their willingness to enter negotiation talks, a likely cut in the tariffs is in the cards. To meet the growing demand, America will, otherwise, have to start manufacturing solar panels domestically, which is unlikely to happen.
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US-China Trade War Dissipates: 3 Solar Stocks in Focus
The U.S. stock market took a hit last week as chances of a possible trade war between America and China were rife. However, on Mar 26, possible talks between the United States and China over tariffs and trade imbalances started making the rounds. This helped the Wall Street gain some lost ground.
What Led to the Possible Trade War?
President Trump’s latest announcement of a possible imposition of a $60-billion tariff on the products imported from China dealt a huge blow to Wall Street last week. Subsequently, China announced to impose an import tariff worth $3 billion on U.S. goods. Per The Washington Post, owing to such formidable announcements, the stock market witnessed one of the worst weeks in years.
Trade relations between the two nations have failed to remain cordial, thanks to Trump’s latest policies. He pledged to reduce the U.S. trade deficit with China and demanded that China must cut the same by $100 billion. In addition to steel and aluminium, tariffs have also been imposed on imported washing machines and solar panels. These are likely to affect China’s economy adversely.
Analysts are of the opinion that Trump’s decisions will not go down well with China and the nation in retaliation may impose tariffs on import of American aircraft as well as U.S. crops since it is one of the biggest buyers of U.S. crops. Given these developments, two of the world’s key economies were almost at the brink of a trade war.
Current Scenario
Following Treasury Secretary Steven Mnuchin’s announcement that the two nations have decided to enter into negotiation talks to avert the trade war, the stock market opened on a fairly upbeat note on Monday. According to a report by The Wall Street Journal, China and America have started arbitration to improve United States’ access to markets in China, which cover wide areas like financial services and manufacturing.
Trump’s letter to China’s economic czar Liu late last week requested for a reduction of Chinese tariffs on U.S. automobiles, more Chinese purchases of U.S. semiconductors and greater access to China’s financial sector by American companies. The news came as a breather to investors as a possible aversion of the trade war seemed to be in the cards. Evidently, the S&P 500 rose 2.7%, Dow Jones Industrial average jumped 2.8% and Nasdaq moved up 3.3%.
Implication of the 30% Tariff on the Solar Industry
In January 2018, Trump administration announced a new import tariff on solar panels and modules, per which, 30% tariff will be levied on solar panel components. In four years’ time the tax rate is expected to come down to 15%. Initially U.S. solar stocks moved up on hopes that such trade restriction will create jobs for the Americans. However, with the passage of time the solar industry’s growth did not sustain as investors became skeptical over the long-term success of the tariff.
This is exactly what the U.S. solar industry advocates feared. The U.S. Solar Energy Industries Association predicted that the tariff may cut forecasted solar installations this year by nearly 20%, to 9 gigawatts from 11 gigawatts, and lead to the loss of 23,000 jobs in the United States, the world’s fourth-largest solar market after China, Japan and Germany.
This is because the U.S. solar market depends largely on imported panels. According to a report by GTM research, 87% of U.S. solar installations used foreign-produced panels, in 2016, primarily from China. So levying a tax on these imports is unlikely to benefit solar stocks.
Per the latest Solar Market Insight Report, solar installations between 2018 and 2022 will be 13% lower than the original forecast, primarily due to U.S. tariffs on panel imports. In fact, U.S. solar installations are unlikely to reach the peak level of 2016 (15.2 gigawatts) until 2023.
Thus, despite the growing demand for solar panels, the prospects of the U.S. solar industry seem to be bleak due to the tariffs. However, with the United States and China now willing to enter into talks for improving trade relationship, there remains a possibility that the two nations might arrive at a mid-way solution for solar energy.
Stocks in Focus
The recent thaw in the two countries hostile relationship is likely to lead to new trade policies for solar panel imports. Thus, we have zeroed in three U.S. solar stocks that investors might want to retain in their watch list. These stocks not only carry a favorable Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) but also boast a solid earnings surprise history. You can see the complete list of today’s Zacks #1 Rank stocks here.
These stocks have also managed to outperform the broader market over a year and flaunt a solid long-term earnings growth rate, thereby reflecting their inert strength to perform favorably in the future as well.
SolarEdge Technologies, Inc. (SEDG - Free Report) provides innovative solar power harvesting and monitoring solutions for residential, commercial, and utility-scale solar PV installations. It sports a Zacks Rank #1.
The company boasts a solid long-term earnings growth rate of 24% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarters by an average of 31.9%.
Over a year, SolarEdge Technologies’ shares skyrocketed 269%, compared with the S&P 500 index’s gain of 10%.
First Solar, Inc. (FSLR - Free Report) designs, manufactures and sells solar electric power modules using a proprietary thin-film semiconductor technology. It carries a Zacks Rank #3 (Hold).
The company boasts a solid long-term earnings growth rate of 10% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarters by an average of 535.9%.
First Solar’s shares surged 161.7% over a year, compared with the S&P 500 index’s upside.
Sunrun Inc. (RUN - Free Report) develops, owns, manages and sells residential solar energy systems across the United States. It carries a Zacks Rank #3.
The company boasts a solid long-term earnings growth rate of 12% and surpassed the Zacks Consensus Estimate for earnings in trailing four quarter by 17.6%.
Over a year, Sunrun’s shares gained 71.8%, compared with the S&P 500 index’s rally.
What’s Ahead?
Trump has always been favoring the usage of coal and has termed the need for alternative energy sources as a 'Chinese hoax'. However, with renewables being the fuel of the future it goes without saying that the U.S. government can not stay away long from harnessing the same. With the recent thaw in the two countries hostile relationship, on account of their willingness to enter negotiation talks, a likely cut in the tariffs is in the cards. To meet the growing demand, America will, otherwise, have to start manufacturing solar panels domestically, which is unlikely to happen.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>