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3 Solar Stocks to Watch Amid Policy and Interest Rate Headwinds
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The U.S. solar market is witnessing growing demand for solar energy and battery storage across the United States, driven by rising electricity consumption, higher power prices, corporate decarbonization commitments and increasing energy requirements from data centers. It is expected to expand significantly in the coming years, supported by rising utility-scale installations and the growing role of solar and battery storage in meeting the country's electricity needs. However, the industry faces challenges from shifting trade policies, including tariffs and import restrictions, which could increase equipment costs, disrupt supply chains and delay project development, while encouraging greater domestic manufacturing. A couple of prominent companies that solar investors may want to monitor are First Solar (FSLR - Free Report) , Sunrun (RUN - Free Report) and Tigo Energy, Inc. (TYGO - Free Report) .
About the Industry
The Zacks Solar industry can be fundamentally categorized into two groups of companies. One is involved in designing and producing high-efficiency solar modules, panels and cells, while the other is engaged in installing grids and, in some cases, entire solar power systems. The industry includes several companies engaged in manufacturing solar power inverters that transform electricity produced by solar panels into grid-compatible power. Per a U.S. Energy Information Administration (“EIA”) report, solar’s share of U.S. electricity generation will be 8% in 2026 and 10% in 2027. It remains the nation's dominant form of new generating capacity.
3 Trends Shaping the Future of the Solar Industry
Strong Demand Supports Solar Market Growth: Across the United States, utilities and commercial businesses are increasingly adopting solar energy combined with battery storage to address rising demand for affordable, reliable and cleaner electricity. Higher electricity prices and corporate decarbonization commitments are making solar power more economically attractive, while battery storage enhances reliability by providing backup power during grid disruptions and outages. Growing electricity consumption from data centers is also emerging as a major driver of demand for renewable energy and storage solutions. The rapid expansion of artificial intelligence, cloud computing and other digital services is prompting hyperscalers and technology companies to invest heavily in large-scale solar and battery storage projects. These investments will help companies secure sufficient power to support their expanding operations while making progress toward their emissions-reduction and net-zero targets.
The Solar Energy Industries Association (“SEIA”), in collaboration with Wood Mackenzie, presents a cautiously positive outlook for the U.S. solar industry. The report highlights that the U.S. solar market is expected to approximately double between 2026 and 2031, supported by rising electricity demand, increasing utility-scale installations and the growing importance of solar and battery storage in meeting the country's power requirements. However, the expansion is expected to be gradual, with annual capacity additions remaining relatively flat at around 44 GWdc over the next five years.
Shifting Trade Policies Influence Solar Industry Economics: According to SEIA, trade policies and import restrictions are reshaping the U.S. solar industry's supply chain and influencing project costs. The imposition of additional tariffs on Chinese solar products, duties on steel and aluminum imports, and trade investigations involving solar products from Southeast Asian countries, including Vietnam, Thailand, Malaysia and Cambodia, are increasing uncertainty around equipment sourcing and pricing. These measures could make imported solar components more expensive, raising procurement and development costs for solar projects. At the same time, they may encourage developers and manufacturers to diversify their supply chains and increase reliance on domestically produced solar equipment.
SEIA further noted that these trade measures are influencing domestic manufacturing decisions. The United States has expanded its solar module manufacturing capacity, but domestic manufacturers still depend on imported solar cells and other components. Consequently, restrictions on imports could create supply shortages, increase equipment prices and delay project development.
Rising Interest Rates Threaten Solar Industry Growth Prospects: Higher Federal Reserve interest rates are generally a headwind for the U.S. solar industry because solar projects require substantial upfront capital investment and often depend on long-term financing. When interest rates remain elevated, developers face higher borrowing costs, making it more expensive to finance utility-scale solar farms, commercial installations and battery storage projects. Higher financing costs can weigh on project profitability, dampen investor interest and prompt developers to delay or abandon projects that fail to meet return expectations.
Sunrun explicitly discussed the impact of higher interest rates in its third-quarter 2026 earnings call on Nov. 4, 2026. Management indicated that persistently elevated interest rates had a modest impact on its projected 2026 results. However, it cautioned that capital costs could rise in 2027 if interest rates remain at current levels.
Zacks Industry Rank Reflects Gloomy Outlook
The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #150, which places it in the bottom 39% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 6.7% to $1.40 since Aug. 31.
Before we present a few solar stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector & S&P 500
The solar industry has underperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively lost 36.5% over the past year, while the Oils-Energy sector has risen 25%. The Zacks S&P 500 composite has surged 9.4% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 9.23X compared with the S&P 500’s 16.03X and the sector’s 5.49X.
Over the past five years, the industry has traded as high as 33.13X, as low as 4.55X and at the median of 12.26X.
EV-EBITDA Ratio (TTM)
3 Solar Stocks to Watch
Sunrun: Based in San Francisco, CA, the company develops, owns, manages and sells residential solar energy systems. The company offers solar services through three channels: direct-to-consumer, solar partner and strategic partnership. Sunrun reported third-quarter 2026 revenues of $1.10 billion, up 52% year over year, while net income attributable to common stockholders increased to $153.2 million from $16.6 million in the prior-year quarter. The company continued to see growth in its direct business, with installations rising 9% year over year. Its storage-first strategy gained traction, as the storage attachment rate reached a record 75%, compared with 70% a year ago, while networked storage capacity expanded to 5.0 GWh.
The Zacks Consensus Estimate for Sunrun’s 2026 earnings per share (EPS) indicates an improvement of 2.9% from the prior-year reported figure. The consensus estimate for 2026 sales indicates an improvement of 17.2% year over year. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: RUN
First Solar: Based in Tempe, AZ, the company is a leading global provider of comprehensive PV solar energy solutions and specializes in designing, manufacturing, and selling solar electric power modules using a proprietary thin-film semiconductor technology. First Solar reported third-quarter 2026 net sales of $1.23 billion, down 23% year over year, primarily due to lower third-party module sales volumes. However, net income increased 25% to $571 million, or $5.30 per diluted share, compared with $456 million, or $4.24 per share, in the prior-year quarter. Its contracted sales backlog was 44 GW as of Sept. 30, 2026. First Solar also authorized a $500 million share repurchase program, signaling management's confidence in the company's long-term prospects.
The Zacks Consensus Estimate for First Solar’s 2026 EPS indicates an improvement of 24.6% from the prior-year reported figure. The consensus estimate for 2027 EPS indicates growth of 40% year over year. The company currently carries a Zacks Rank #3 (Hold).
Price & Consensus: FSLR
Tigo Energy: Based in Campbell, CA, the company is a provider of intelligent solar and energy storage solutions. Tigo Energy is set to benefit from the launch of its next-generation software-enhanced Tigo GO Battery in North America. It reported third-quarter 2026 revenues of $24.0 million, down 21.5% year over year. However, the company returned to GAAP profitability, recording net income of $0.4 million compared to a net loss of $2.2 million in the prior-year quarter. Gross margin improved to 46.2% from 42.7%, supported by a better cost structure, while operating expenses declined 10% to $11.2 million. Tigo Energy shipped 698,000 units, representing 517 MW of Module Level Power Electronics, during the quarter. The company updated its full-year 2026 revenue outlook to $95-$97 million and plans to prioritize investments in faster-growing markets, particularly Eastern Europe and Australia, to expand market share in 2027.
The Zacks Consensus Estimate for 2026 EPS indicates an increase of 116.7% from the prior-year reported figure. The consensus estimate for 2027 sales implies an improvement of 3.58% year over year. The stock currently carries a Zacks Rank #3.
View the Zacks #1 Rank List
Image: Bigstock
3 Solar Stocks to Watch Amid Policy and Interest Rate Headwinds
The U.S. solar market is witnessing growing demand for solar energy and battery storage across the United States, driven by rising electricity consumption, higher power prices, corporate decarbonization commitments and increasing energy requirements from data centers. It is expected to expand significantly in the coming years, supported by rising utility-scale installations and the growing role of solar and battery storage in meeting the country's electricity needs. However, the industry faces challenges from shifting trade policies, including tariffs and import restrictions, which could increase equipment costs, disrupt supply chains and delay project development, while encouraging greater domestic manufacturing. A couple of prominent companies that solar investors may want to monitor are First Solar (FSLR - Free Report) , Sunrun (RUN - Free Report) and Tigo Energy, Inc. (TYGO - Free Report) .
About the Industry
The Zacks Solar industry can be fundamentally categorized into two groups of companies. One is involved in designing and producing high-efficiency solar modules, panels and cells, while the other is engaged in installing grids and, in some cases, entire solar power systems. The industry includes several companies engaged in manufacturing solar power inverters that transform electricity produced by solar panels into grid-compatible power. Per a U.S. Energy Information Administration (“EIA”) report, solar’s share of U.S. electricity generation will be 8% in 2026 and 10% in 2027. It remains the nation's dominant form of new generating capacity.
3 Trends Shaping the Future of the Solar Industry
Strong Demand Supports Solar Market Growth: Across the United States, utilities and commercial businesses are increasingly adopting solar energy combined with battery storage to address rising demand for affordable, reliable and cleaner electricity. Higher electricity prices and corporate decarbonization commitments are making solar power more economically attractive, while battery storage enhances reliability by providing backup power during grid disruptions and outages. Growing electricity consumption from data centers is also emerging as a major driver of demand for renewable energy and storage solutions. The rapid expansion of artificial intelligence, cloud computing and other digital services is prompting hyperscalers and technology companies to invest heavily in large-scale solar and battery storage projects. These investments will help companies secure sufficient power to support their expanding operations while making progress toward their emissions-reduction and net-zero targets.
The Solar Energy Industries Association (“SEIA”), in collaboration with Wood Mackenzie, presents a cautiously positive outlook for the U.S. solar industry. The report highlights that the U.S. solar market is expected to approximately double between 2026 and 2031, supported by rising electricity demand, increasing utility-scale installations and the growing importance of solar and battery storage in meeting the country's power requirements.
However, the expansion is expected to be gradual, with annual capacity additions remaining relatively flat at around 44 GWdc over the next five years.
Shifting Trade Policies Influence Solar Industry Economics: According to SEIA, trade policies and import restrictions are reshaping the U.S. solar industry's supply chain and influencing project costs. The imposition of additional tariffs on Chinese solar products, duties on steel and aluminum imports, and trade investigations involving solar products from Southeast Asian countries, including Vietnam, Thailand, Malaysia and Cambodia, are increasing uncertainty around equipment sourcing and pricing. These measures could make imported solar components more expensive, raising procurement and development costs for solar projects. At the same time, they may encourage developers and manufacturers to diversify their supply chains and increase reliance on domestically produced solar equipment.
SEIA further noted that these trade measures are influencing domestic manufacturing decisions. The United States has expanded its solar module manufacturing capacity, but domestic manufacturers still depend on imported solar cells and other components. Consequently, restrictions on imports could create supply shortages, increase equipment prices and delay project development.
Rising Interest Rates Threaten Solar Industry Growth Prospects: Higher Federal Reserve interest rates are generally a headwind for the U.S. solar industry because solar projects require substantial upfront capital investment and often depend on long-term financing. When interest rates remain elevated, developers face higher borrowing costs, making it more expensive to finance utility-scale solar farms, commercial installations and battery storage projects. Higher financing costs can weigh on project profitability, dampen investor interest and prompt developers to delay or abandon projects that fail to meet return expectations.
Sunrun explicitly discussed the impact of higher interest rates in its third-quarter 2026 earnings call on Nov. 4, 2026. Management indicated that persistently elevated interest rates had a modest impact on its projected 2026 results. However, it cautioned that capital costs could rise in 2027 if interest rates remain at current levels.
Zacks Industry Rank Reflects Gloomy Outlook
The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #150, which places it in the bottom 39% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 6.7% to $1.40 since Aug. 31.
Before we present a few solar stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector & S&P 500
The solar industry has underperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively lost 36.5% over the past year, while the Oils-Energy sector has risen 25%. The Zacks S&P 500 composite has surged 9.4% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 9.23X compared with the S&P 500’s 16.03X and the sector’s 5.49X.
Over the past five years, the industry has traded as high as 33.13X, as low as 4.55X and at the median of 12.26X.
EV-EBITDA Ratio (TTM)
3 Solar Stocks to Watch
Sunrun: Based in San Francisco, CA, the company develops, owns, manages and sells residential solar energy systems. The company offers solar services through three channels: direct-to-consumer, solar partner and strategic partnership. Sunrun reported third-quarter 2026 revenues of $1.10 billion, up 52% year over year, while net income attributable to common stockholders increased to $153.2 million from $16.6 million in the prior-year quarter. The company continued to see growth in its direct business, with installations rising 9% year over year. Its storage-first strategy gained traction, as the storage attachment rate reached a record 75%, compared with 70% a year ago, while networked storage capacity expanded to 5.0 GWh.
The Zacks Consensus Estimate for Sunrun’s 2026 earnings per share (EPS) indicates an improvement of 2.9% from the prior-year reported figure. The consensus estimate for 2026 sales indicates an improvement of 17.2% year over year. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: RUN
First Solar: Based in Tempe, AZ, the company is a leading global provider of comprehensive PV solar energy solutions and specializes in designing, manufacturing, and selling solar electric power modules using a proprietary thin-film semiconductor technology. First Solar reported third-quarter 2026 net sales of $1.23 billion, down 23% year over year, primarily due to lower third-party module sales volumes. However, net income increased 25% to $571 million, or $5.30 per diluted share, compared with $456 million, or $4.24 per share, in the prior-year quarter. Its contracted sales backlog was 44 GW as of Sept. 30, 2026. First Solar also authorized a $500 million share repurchase program, signaling management's confidence in the company's long-term prospects.
The Zacks Consensus Estimate for First Solar’s 2026 EPS indicates an improvement of 24.6% from the prior-year reported figure. The consensus estimate for 2027 EPS indicates growth of 40% year over year. The company currently carries a Zacks Rank #3 (Hold).
Price & Consensus: FSLR
Tigo Energy: Based in Campbell, CA, the company is a provider of intelligent solar and energy storage solutions. Tigo Energy is set to benefit from the launch of its next-generation software-enhanced Tigo GO Battery in North America. It reported third-quarter 2026 revenues of $24.0 million, down 21.5% year over year. However, the company returned to GAAP profitability, recording net income of $0.4 million compared to a net loss of $2.2 million in the prior-year quarter. Gross margin improved to 46.2% from 42.7%, supported by a better cost structure, while operating expenses declined 10% to $11.2 million. Tigo Energy shipped 698,000 units, representing 517 MW of Module Level Power Electronics, during the quarter. The company updated its full-year 2026 revenue outlook to $95-$97 million and plans to prioritize investments in faster-growing markets, particularly Eastern Europe and Australia, to expand market share in 2027.
The Zacks Consensus Estimate for 2026 EPS indicates an increase of 116.7% from the prior-year reported figure. The consensus estimate for 2027 sales implies an improvement of 3.58% year over year. The stock currently carries a Zacks Rank #3.
Price & Consensus: TYGO