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Solar stocks began a massive bull market during the panic lows of the COVID-19 pandemic in March 2020. The Invesco Solar ETF, a basket of solar stocks and a proxy for the industry, rallied for ten straight months from a low of $21.14 to a high of $125.98! However, since then, the sector has melted lower and has retraced back to the $40s, never recovering from the 2022 equity bear market and suffering from a more “hawkish” Fed.
Though solar stocks have been brutal to investors recently, they are worth watching because when they trend, they trend better than almost any other industry on Wall Street. Recently, solar stocks are beginning to show several signs that a turnaround is near and the next big bull market may be around the corner, including:
Potential Rate Cuts
The solar industry is one of the most interest rate-sensitive industries on Wall Street because:
Projects Require a Large Upfront Investment: When interest rates are high, it becomes less economical for solar companies to borrow money for expansion.
Consumer Liquidity: With Higher rates, consumers have less disposable income to spend on solar.
Valuations: Hawkish Fed policy weighs on high valuation/growthy areas of the market.
One of the hottest debates and the biggest uncertainty on Wall Street is how the Fed will handle interest rates moving forward. Inflation is stubborn, but growth is slowing. However, Friday’s weaker-than-expected jobs data gives investors a vital clue that the Fed will cut rates this year. The U.S. Fed Fund Futures are pricing in a 78% likelihood of a rate cut in September. A rate cut would be extremely bullish for the industry.
Data Center
AI and cloud projects are causing insatiable demand for energy-sucking data centers. With climate concerns still at the forefront of policy maker’s minds, solar will play an essential role in powering data centers. In fact, Friday morning, a Goldman Sachs research report projects First Solar has 50% upside due to soaring demand from data center growth.
Insider Buying
Earlier this week, Mandy Yang, the CFO and EVP of Enphase Energy, purchased more than $400k worth of ENPH stock. The sizable transaction shows that insiders have high conviction that the low is in for solar stocks.
IRA is a Long-Term Catalyst
The Inflation Reduction Act (IRA) is less about inflation and more about clean energy incentives. According to the EPA, “The IRA is the most significant climate legislation in U.S. history, offering funding, programs, and incentives to accelerate the transition to a clean energy economy and will likely drive significant deployment of new clean electricity resources.” The IRA will be a bullish long-term catalyst for the space.
Bottom Line
After years of frustrating action, the solar industry is poised to move higher. Bullish signs include insider buying, lower interest rates ahead, and data center energy demand.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: TAN, Goldman Sachs, First Solar and Enphase Energy
For Immediate Release
Chicago, IL – May 6, 2024 – Today, Zacks Investment Ideas feature highlights Invesco Solar ETF (TAN - Free Report) , Goldman Sachs (GS - Free Report) , First Solar (FSLR - Free Report) and Enphase Energy (ENPH - Free Report) .
4 Factors Point to a Sunny Future in Solar
Solar stocks began a massive bull market during the panic lows of the COVID-19 pandemic in March 2020. The Invesco Solar ETF, a basket of solar stocks and a proxy for the industry, rallied for ten straight months from a low of $21.14 to a high of $125.98! However, since then, the sector has melted lower and has retraced back to the $40s, never recovering from the 2022 equity bear market and suffering from a more “hawkish” Fed.
Though solar stocks have been brutal to investors recently, they are worth watching because when they trend, they trend better than almost any other industry on Wall Street. Recently, solar stocks are beginning to show several signs that a turnaround is near and the next big bull market may be around the corner, including:
Potential Rate Cuts
The solar industry is one of the most interest rate-sensitive industries on Wall Street because:
Projects Require a Large Upfront Investment: When interest rates are high, it becomes less economical for solar companies to borrow money for expansion.
Consumer Liquidity: With Higher rates, consumers have less disposable income to spend on solar.
Valuations: Hawkish Fed policy weighs on high valuation/growthy areas of the market.
One of the hottest debates and the biggest uncertainty on Wall Street is how the Fed will handle interest rates moving forward. Inflation is stubborn, but growth is slowing. However, Friday’s weaker-than-expected jobs data gives investors a vital clue that the Fed will cut rates this year. The U.S. Fed Fund Futures are pricing in a 78% likelihood of a rate cut in September. A rate cut would be extremely bullish for the industry.
Data Center
AI and cloud projects are causing insatiable demand for energy-sucking data centers. With climate concerns still at the forefront of policy maker’s minds, solar will play an essential role in powering data centers. In fact, Friday morning, a Goldman Sachs research report projects First Solar has 50% upside due to soaring demand from data center growth.
Insider Buying
Earlier this week, Mandy Yang, the CFO and EVP of Enphase Energy, purchased more than $400k worth of ENPH stock. The sizable transaction shows that insiders have high conviction that the low is in for solar stocks.
IRA is a Long-Term Catalyst
The Inflation Reduction Act (IRA) is less about inflation and more about clean energy incentives. According to the EPA, “The IRA is the most significant climate legislation in U.S. history, offering funding, programs, and incentives to accelerate the transition to a clean energy economy and will likely drive significant deployment of new clean electricity resources.” The IRA will be a bullish long-term catalyst for the space.
Bottom Line
After years of frustrating action, the solar industry is poised to move higher. Bullish signs include insider buying, lower interest rates ahead, and data center energy demand.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.