Best Solar Stocks To Buy: Bet On Energy Efficiency?

Best Solar Stocks To Buy Now: With the cost of solar energy falling, the decision to install solar panels is no longer limited to business and residential customers who will pay more to meet clean energy goals.

Instead, solar energy is a viable option for saving on operational expenses, which has attracted interest from a wide variety of large industrial developers. It is now common to see solar panels included in new industrial and commercial buildings, and panels are being retrofitted to existing properties during renovation and rehab projects.

The Solar Energy Industries Association projected 25 percent year over year growth in total gigawatts for 2019 – an increase from the original forecast of 14 percent. This represents an important change from the gloomy 2018 outlook, when installations declined precipitously after the US announced 30 percent tariffs on imported panels.

The companies developing advanced solar energy technology, manufacturing panels, and installing solar energy systems in buildings around the world are reaping the financial rewards of increased demand.

Environmentally-conscious investors – and those who foresee a continued demand for clean energy – are ready to buy solar stocks. However, with so many companies to choose from, it can be challenging to select the right investment. These are some of the most talked about options, based on financial results and future growth prospects.

First Solar Stock 

First Solar has been a leader in the solar market, because it produces some of the most advanced panel technology available. The company has developed a thin solar film that costs consumers less while providing more efficient energy.

The most recent version of these panels, First Solar’s Series 6, gives the company a higher margin to work with. That is critical to First Solar’s future profitability in an industry where competition is fierce and everyone wants a bargain. Plus, the extra cash means more to invest in disruptive solar technology.

First Solar [NASDAQ: FSLR] sells more than 20 gigawatts (GWs) worth of modules each year, and it has a long list of clients across the country and around the world.

First Solar Is Growing Fast

For the second quarter of 2019, the company announced net sales of $585 million – an increase of $53 million over the previous quarter. Management credited the improved sales to a rising number of installations in the United States and Australia.

The second quarter did bring a net loss per share of $0.18, but that is a substantial improvement over the previous quarter’s loss of $0.64 per share. For the full year, the business expects total sales to come in between $3.5 billion and $3.7 billion, with earnings per share in the range of $2.25 – $2.75.

Overall, analysts are generally optimistic about First Solar’s potential for long-term success, making these shares a smart choice for investors who want to add solar stock to their portfolios.

SolarEdge Technologies Stock 

SolarEdge Technologies is an industry pioneer with a focus on finding new solutions for persistent obstacles that plague solar power users. So far, its biggest success has been the development of power optimizers.

Basically, solar panels capture direct current (DC) energy from the sun, which must then be converted to alternating current (AC) energy for use in power grids.

Older solar technology used a central inverter attached to the end of a string of panels. While the string inverter system is effective and relatively inexpensive, it comes with a big problem – if one of the panels in the string stops working properly, the entire group goes down.

The most common alternative to the string inverter system is micro-inverters. These are installed on each panel, so all of the panels operate independently. Unfortunately, while far more effective than the string inverter system, micro-inverters are pricey.

SolarEdge [NASDAQ: SEDG] designed power optimizers, which combine the benefits of both traditional options. The power optimizers are installed on each panel and attached to a string inverter at the end. This prevents one crippled panel from impacting the entire group, but it is far less expensive than micro-inverters.

SolarEdge Acquisitions Means Innovation

In addition to this advanced technology, SolarEdge is deeply involved in other innovations. Through its acquisition of Gamatronic, it is exploring opportunities for uninterruptible power supplies (UPS), and it recently bought SMRE – a producer of integrated powertrain technology and electronics for plug-in electric vehicles (EVs).

On top of that, SolarEdge [NASDAQ: SEDG] purchased Kokam, which manufactures high-performance batteries and lithium-ion cells.

By combining technological advancements from these three companies, SolarEdge is likely to be on the cutting-edge of the next clean energy breakthrough. That means good news for investors who agree that renewable energy will play an important role in the world’s economic future.

For the second quarter of 2019, SolarEdge reported record revenues of $325 million.

Sales of solar products made up $306.7 million of that total. GAAP net income came in at $33.1 million, and non-GAAP net income was at its highest in company history – $49.3 million.

GAAP net diluted earnings per share (EPS) were $0.66, and non-GAAP net diluted EPS were $0.94. Overall, this bodes well for investors who choose to buy now.

SunPower Stock: A Bet On Energy Efficiency

There are a lot of companies competing for top slots in the solar industry, and the only way to challenge today’s top solar businesses is to offer something new.

SunPower differentiates itself by being the only company to design and offer a combined solar collection and storage system.

For consumers, this setup ensures a steady supply of backup power in the event that there is an outage, and it typically means substantial savings as far as time-of-use rates.

SunPower [NASDAQ: SPWR] caters to residential customers through careful attention to homeowners’ most frequently cited concerns about solar panel installation. For example, it has a market-leading design tool that helps homeowners visualize the aesthetic impact of solar panel installation.

SunPower developed the first 400-watt solar panels for residential use, so that homes could enjoy more power with fewer panels. Such features make SunPower popular among residential customers, who often put off solar panel installation for fear of ruining their homes’ curb appeal.

SunPower Gross Margins Are Rising 

The company reported improved results for the second quarter of 2019, with GAAP revenues totaling $436.3 million. This represents a decrease from the second quarter of 2018, which was $449.1 million, but an increase from the previous quarter’s $348.2 million.

A substantial improvement in gross margin made SunPower far more profitable year over year and quarter over quarter. For the second quarter of 2019, GAAP net income was $121.5 million, compared to a loss of $89.7 million in the first quarter of 2019 and a loss of $447.1 million in the second quarter of 2018.

SunPower [NASDAQ: SPWR] just recently stumbled upon its small project strategy, putting an end to five years of scattered priorities.

The company dabbled in a variety of industry sub-categories before realizing it could make the biggest impact with the previously neglected residential and small business consumers.

If SunPower holds steady with this strategy, there is every reason to believe it will be moderately successful long-term. However, the company’s unimpressive history and uncertain future has placed SunPower at the bottom of many analysts’ buy lists.

Best Solar Stocks to Buy Now: The Bottom Line

When it comes to buying solar stocks, the bottom line is competition. That is to say, investors should consider the companies best able to offer innovative solutions that meet consumer expectations around cost.

There are plenty of solar panel manufacturers, and even more companies that specialize in installation. Long-term profits are most likely for those that differentiate themselves while simultaneously establishing strong results in revenues and profits.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.