Most solar stocks had a decent performance in 2020—despite global lockdown orders that negatively impacted the industry’s supply and installation sectors.
The industry was resilient, on one hand, due to increased residential energy use, and on the other, due to increased corporate demand for solar. Homeowners facing skyrocketing energy bills due to “work from home” orders showed interest in installing solar, while the rise of socially responsible investing (SRI) is pushing corporations to invest in the technology to improve their ESG status.
Even though the pandemic had negative impacts on the overall stock market due to the pressure of economic uncertainty, solar stocks stayed resilient. Piggybacking on a booming construction industry, residential solar projects around the world went on as planned.
Other solar stocks that didn’t perform well are also already bouncing back with encouraging strength this early 2021.
With all that said, let’s take a look at some solar stocks to watch in 2021:
SolarEdge Technologies: SEDG (NASDAQ)
SolarEdge Technologies specializes in manufacturing inverters and power optimizers used in photovoltaic solar panels.
The company’s narrow product focus has enabled it to push the boundaries of innovation by improving the conversion efficiency of DC to AC electricity. This has allowed SolarEdge to undercut its competitors’ pricing to win a growing share in the green energy market.
With the success of its base product line (inverters), SolarEdge has begun exploring opportunities in energy storage technologies.
The company exhibits a cash-rich balance sheet, meaning it has the financial flexibility to expand its manufacturing capacity and weather future market tribulations, making it a smart and relatively safe choice for investors.
Enphase Energy: ENPH (NASDAQ)
Enphase Energy primarily focuses on the manufacturing of microinverters.
The company has a market cap of 16.3 billion dollars (as of 2021) and posted a 12-month return of 489.2% throughout 2020. This is a dramatic reversal from just a few years prior. In 2017, Enphase was nearly delisted from the Nasdaq exchange; however, its growth has surged dramatically since then.
The company’s new IQ 7 line of products has enabled it to cut costs and increase gross margin. This stock is likely to grow in value in 2021, thanks to its partnership with Maxeon (formerly the SunPower manufacturing wing).
The company’s integration with solar manufacturers will enable higher-volume sales, translating into lower costs for Enphase Energy in the new year.
It’s worth noting that Enphase’s stock is priced similar to tech stocks, rather than solar energy stocks. Relative to the other firms on this list, investing in Enphase Energy is more expensive.
First Solar: FSLR (NASDAQ)
No firm on this list demonstrates the resiliency of the solar market like First Solar does.
This firm focuses on manufacturing solar power modules by utilizing semi-conductive film technology.
First Solar has a market cap of 9.7 billion dollars and posted net income growth of 406.3% in the third quarter of 2020, despite net sales growing only 70%.
First Solar has made clear that despite Covid-19, the company is doing well. Operating expenses have drastically fallen since the beginning of the pandemic, which has enabled such an impressive quarterly net income growth. As the pandemic hasn’t impacted the company’s finances, investors should expect excellent returns throughout 2021.
SunRun: RUN (NASDAQ)
Finally, our discussion turns to SunRun. Sunrun designs, installs and maintains residential solar installations in the United States energy market—additionally, the company offers some battery solutions as well.
Sunrun stock is up more than 200% over the past year but down nearly 10% year to date.
The company continues to lose money under traditional accounting metrics because of its business model. Most customers don’t buy panels upfront–they sign a long-term lease or subscribe, as the company puts it.
So Sunrun books the cost of installing the panels immediately but gets paid for those panels over a period of decades. Considering the unpopularity of solar leasing, this is unlikely to be a sustainable long-term strategy.
Sunrun reported a fourth-quarter 2020 loss of $169.3 million, after reporting a profit in the same period a year earlier.
For these reasons, investors should watch this stock very closely in 2021.
Solar power stocks soared in 2020 on optimism about the pace of the renewables revolution and a leftward political shift. Renewable technologies showed resilience in the face of the Covid-19 global recession.
To the delight of green energy investors, solar stocks are likely to gain additional strength in 2021, as governments worldwide, including Canada, the United Kingdom, the United States, the European Union, and Australia, are all announcing strong commitments to meet net-zero goals in the near future.