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3 Reasons to Buy Solar ETFs Now

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U.S. President Joe Biden has signed a $740 billion climate change, healthcare and tax “Inflation Reduction Act.” “The Inflation Reduction Act has given the solar industry the most long-term certainty it has ever had,” Michelle Davis, principal analyst at Wood Mackenzie, said in a statement, as quoted on CNBC (read: Inflation Reduction Act: Clean Energy & EV ETFs Winners).

Inflation Reduction Act

A new report from the Solar Energy Industries Association and Wood Mackenzie predicts massive growth in solar installations thanks to long-term surety provided by the Inflation Reduction Act, the CNBC article noted. The U.S. solar market will nearly triple over the next five years, according to a new report from the Solar Energy Industries Association and Wood Mackenzie.

“Ten years of investment tax credits stands in stark contrast to the one-, two-, or five-year extensions that the industry has experienced in the last decade. It’s not an overstatement to say that the IRA will lead to a new era for the U.S. solar industry,” Michelle Davis, principal analyst at Wood Mackenzie, said in a statement.

Grid Outages & Rising Power Prices

During the second quarter of 2022, the residential solar segment set its fifth quarterly record, with 1.36 GW installed. The number, which marks a 37% increase year over year, represents about 180,000 new customers. Growth came on the heels of recurrent grid outages. California has asked residents to cut use as record temperatures boosted power demand to new highs. Hence, residents resorted to solar alternatives.

Enphase Energy Inc. (ENPH - Free Report) recently stated that an increased adoption of its IQ Microinverters in the United States is being witnessed by Meraki Solar, a leading national residential solar service provider in the United States. Meraki Solar offers Enphase products to customers switching to solar energy to fulfill their energy needs. Enphase earned 80% of its revenues from the United States in the last reported quarter.

Upbeat Earnings

SolarEdge Technologies Inc.’s (SEDG - Free Report) reported second-quarter adjusted earnings of 95 cents per share, beating Zacks Consensus Estimate of 86 cents. The bottom line declined by 25.8% from the prior-year quarter’s earnings of $1.28 per share. SolarEdge’s revenues of $727.8 million in the second quarter surpassed the Zacks Consensus Estimate of $726 million by almost a cent. The top line surged 52% from the year-ago quarter’s $480.1 million.

Sunrun (RUN - Free Report) came up with a quarterly loss of $0.06 per share versus the Zacks Consensus Estimate of a loss of $0.20. This compares to a loss of $0.14 per share a year ago. These figures are adjusted for non-recurring items. Sunrun posted revenues of $584.58 million for the quarter ended June 2022, surpassing the Zacks Consensus Estimate by 20.52%.

ETF in Focus

Against this backdrop, below we highgliht the pureplay solar ETF Invesco Solar ETF (TAN - Free Report) . The fund follows the MAC Global Solar Energy Index is comprised of companies in the solar energy industry. The fund holds 54 stocks in total. The fund puts 57.52% weight in the Information Technology sector, followed by 20.83% weight in Utilities. United States takes the top spot at 53.68% while China takes the next spot with 18.96% weight. The fund charges 66 bps in fees.

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