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MARKETS LIVE BLOG:

S&P 500, NASDAQ NOTCH BIG WINS WITH TESLA EARNINGS ON DECK

Tech-focused investors prepare for fresh wave of earnings highlighted by struggling Tesla

US Solar Market Rally Likely to Continue: 3 Stocks to Buy

Aparajita Dutta

The U.S. solar market has been rallying since the beginning of 2019, reflecting a stark improvement from last year. Notably, favorable market dynamics resulted in a 10% year-over-year increase in U.S. solar installations during the first quarter.

Impressively, over the past year, the market has comfortably surpassed the S&P 500, reflecting marked improvement. Evidently, the solar market gained 42.3% against S&P 500’s decline of 3% in the past year. In the one-year period prior to this, the S&P 500 had witnessed an increase of 17.9% compared with the solar market’s rise of 11.1%.

Factors Driving the Market

Rapidly declining cost of solar installations is perhaps the primary factor driving the booming solar energy business in the United States. Per a report by the Solar Energy Industries Association (SEIA), the cost to install solar has dropped by more than 70% over the last decade, leading the industry to expand into new markets and deploy thousands of systems nationwide. In particular, prices during the first quarter of 2019 were at their lowest levels in history across all market segments.

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With top companies increasingly investing in solar energy, the U.S. solar market has expanded significantly of late. For example, tech giant Apple AAPL is now the leading procurer of corporate solar in the United States with nearly 400 megawatts (MW) of total installed capacity, per SEIA’s 2018 Solar Means Business report. Falling prices along with more flexible financing and procurement structures have led to rapid growth in corporate solar adoption.

With increasing number of U.S. states adopting favorable renewable portfolio standards (RPS) that promote usage of renewable electricity in the power grid, solar prospects have improved manifold in the United States. Notably, four states — New Mexico, Washington, Nevada, and Maryland — and the District of Columbia have updated their RPS since the start of 2019. Such initiatives by the state governments are boosting solar adoption in the nation.

Do New Tariff Threats Pose Risk?

Thanks to Trump’s tweet on Aug 23 that promised to hike tariffs on imports of Chinese goods worth $250 billion from 25% to 30%, effective Oct 1, the trade war between America and China has once again intensified. Naturally, this sent the stock market on a rollercoaster ride once again. Nevertheless, Trump’s latest announcement that the two nations might resume trade talks again, at the ongoing G7 Summit, brought some solace.

Considering Trump’s frequent contradictory statements, the fate of the solar industry, in terms of tariff impact, is uncertain. However, this should not discourage solar investors as the market will eventually boom, considering the growing demand for solar across the globe. Afterall, monthly U.S. solar PV module imports in the first four months of 2019 grew 16% more than the average imports in the first four months of 2017, before the announcement of the 30% tariff imposition.

We expect the U.S. solar market’s momentum to continue in the days ahead. In line with this, Wood Mackenzie Power & Renewables now projects more than 13 GW of solar capacity additions in 2019 in the United States, indicating 25% growth year over year.

Our Picks

With the help of the Zacks Stock Screener, we have identified three attractive solar stocks that possess a favorable Zacks Rank and have outperformed the broader market in the past year.

Canadian Solar CSIQ, a solar module manufacturer, sports a Zacks Rank #1 (Strong Buy). Its shares have rallied 68.3% in the past year against the S&P 500’s decline of 3.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enphase Energy ENPH, a solar inverter producer, currently carries a Zacks Rank #2 (Buy). Its shares have gained a massive 591% in the past year.

SolarEdge Technologies SEDG, another solar inverter developer, also sports a Zacks Rank #1. Its shares have gained 72.1% in the past year.

 

More Stock News: This Is Bigger than the iPhone!                   

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Canadian Solar Inc. (CSIQ) : Free Stock Analysis Report
 
Enphase Energy, Inc. (ENPH) : Free Stock Analysis Report
 
SolarEdge Technologies, Inc. (SEDG) : Free Stock Analysis Report
 
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