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Beyond Earnings, Is It Tesla That is Energizing Clean ETFs?

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Clean energy ETFs have been witnessing a power-packed rally in the past year, breezing past the S&P 500. Invesco Solar ETF (TAN - Free Report) , ALPS Clean Energy ETF (ACES - Free Report) and iShares Global Clean Energy ETF (ICLN - Free Report) were up 69.8%, 68% and 46.2%, respectively, against a 21.8% gain in the S&P 500.

The rally this year strengthened, with the above-mentioned clean energy ETFs adding 25% to 27%, steering past the S&P 500’s 4% return. If this was not enough, solar ETF TAN spiked more than 8% on Feb 19 and added about 1.6% after hours (read: Sector ETFs at the Midpoint in Q1: Hits & Misses).

Enphase Energy Inc.’s (ENPH - Free Report) stellar earnings should mainly get the credit as the stock surged 42.4% on the day following the earnings release. The ENPH earnings acted as a cornerstone for all clean energy stocks and ETFs.  All funds heavy on ENPH recorded solid gains on Feb 19.

Another solar stock SolarEdge Technologies Inc. (SEDG - Free Report) added about 18% on Feb 19as an analyst raised his price target by 17% ahead of the solar power company's fourth-quarter earnings release, after market close. SolarEdge also beat on both lines. Both ENPH and SEDG beat earnings estimates in the past four quarters.

Apart from the earnings picture, Tesla’s (TSLA - Free Report) rally is probably acting as a tailwind for the space. Tesla surged more than 100% this year, probably giving a lift to most clean ETFs (especially those which are heavy on solar business).

Let’s delve deeper into the developments in the clean energy space.

Inside ENPH Earnings

Enphase Energy reported fourth-quarter 2019 adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents and surged a massive 875% year over year. Revenues of $210 million surpassed the consensus estimate of $204.8 million and soared 119.8% on solid shipments.

For first-quarter 2020, Enphase Energy expects revenues of $200-$210 million, including $44.5 million from ITC safe harbor shipments. The Zacks Consensus Estimate for the same is pegged at $171.7 million, below the company’s guided range.

The stock has a Zacks Rank #2 (Buy) and hails from a favorable Zacks industry (placed at the top 42% of 250+ industries). The stock has a top Growth and Momentum Score of A.

Inside SEDG Earnings

SolarEdge Technologies came out with non-recurring quarterly earnings of $1.65 per share, beating the Zacks Consensus Estimate of $1.30. This compares to earnings of 63 cents a year ago. SolarEdge posted revenues of $418.22 million in the quarter, beating the Zacks Consensus Estimate by 0.71%. This compares to year-ago revenues of $263.67 million. SEDG also has a Growth Score of A.

Tesla’s Solar Plan

The hottest stock of Wall Street right now may be known for its electric vehicles, but its growing solar ventures could be the next big thing. The company's solar power and storage battery businesses are likely to drive shares ahead, per analysts. Solar initiative currently makes up only 6% of its revenues but could be a gamechanger in the coming days.

Tesla is boosting production of Solarglass Roof, its solar panels that look like roofing tiles instead of the traditional solar panels which aren’t preferred by many. It also sells large batteries known as the Powerwall, “which can store the excess electricity that is created during the day by the solar panels.”

The Piper Sandler analyst projects that “Tesla's solar and battery business could reach about $80 billion a year in the 2030s, up from only $1.6 billion in 2019.” The analyst hiked the target price of the stock and shares soared about 6.9% on Feb 19.

Tesla has about 16% weight in First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) (up 4.4% on Feb 19) and 14.4% weight in VanEck Vectors Low Carbon Energy ETF (SMOG - Free Report) . SMOG added 3.4% on Feb 19 (read: 5 ETFs Riding on Tesla's Incredible Surge).

Other Clean Energy ETFs in Focus

ICLN added 5.7% on Feb 19 as ENPH an SEDG take more than 11% of the fund. Both the solar stocks take about 17% of TAN and have thus provided the fund solid gains. ACES invests 8.84% in ENPH and 10% in TSLA. No wonder, the fund gained 5.6% on Feb 19.

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