Top Solar Stocks for Q3 2023
Solar stocks have failed to shine over the past 12 months despite a continuing shift to renewable energy sources and lucrative government incentives to install solar infrastructure. Disrupted supply chains, rising interest rates, and policy uncertainty all have presented challenges for this burgeoning sector.
The sector’s largest exchange-traded fund (ETF) by assets under management (AUM), the Invesco Solar ETF (TAN), has shed 34.1% over the past year. By comparison, the large-capitalization Russell 1000 Index has gained nearly 10.5%.
Below, we review the top three solar stocks with the best value, the fastest growth, and the most momentum, respectively. All figures are as of late August 2023.
Best Value Solar Stocks
The solar stocks presented in the table below have the lowest 12-month trailing price-to-earnings (P/E) ratio. This metric measures a company’s stock price relative to its earnings per share (EPS), providing insight into how much investors are willing to pay for each dollar of earnings generated. By comparing P/E ratios within the solar sector and against broader market benchmarks, investors can gauge the relative attractiveness of solar stocks for investment.
| Best Value Solar Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/E Ratio | |
| Daqo New Energy Corp. (DQ) | 35.4 | 2.7 | 2.6 |
| JinkoSolar Holding Co. (JKS) | 34.6 | 1.7 | 4.9 |
| Canadian Solar Inc. (CSIQ) | 32.1 | 2.1 | 7.2 |
Source: YCharts
- Daqo New Energy Corp.: Manufactures high-quality polysilicon for the global solar industry. Specifically, the Chinese-based company produces ultra-pure polysilicon used in solar cells, modules, ingots, and wafers. The solar infrastructure maker announced in August that Chief Executive Officer (CEO) Longgen Zhang will step down due to personal reasons and be replaced by the vice chairman of the company’s board, Xiang Xu.
- JinkoSolar Holding Co.: Specializes in the production of high-quality photovoltaic products. It offers offers solar modules, silicon wafers, solar cells, recovered silicon materials, and silicon ingots. JinkoSolar’s key customers include solar developers, engineering, procurement, and construction (EPC) companies, and residential customers. The company reported in August that its second-quarter module shipments increased 36.2% sequentially, and 74.4% from a year earlier.
- Canadian Solar Inc.: It is known for its innovative photovoltaic technology and project development expertise. Its customers include utilities, commercial and industrial entities, and residential users. The company develops, manufactures and sells solar ingots, wafers, cells, modules, and other solar-power and battery-storage products through two business segments, Canadian Solar and Global Energy. Canadian Solar announced in July that it will deliver energy-storage products to its subsidiary Recurrent Energy for a project in Arizona.
Fastest-Growing Solar Stocks
The table below presents the top three solar stocks ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY EPS growth. Comparing both metrics gives investors a better indication of a company’s overall financial position and growth prospects.
| Fastest-Growing Solar Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Canadian Solar (CSIQ) | 32.1 | 2.1 | 750 | 36 |
| SolarEdge Technologies Inc. (SEDG) | 170.0 | 9.6 | 681 | 36 |
| Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI) | 23.6 | 2.5 | N/A | 155 |
Source: YCharts
- Canadian Solar: See company description above.
- SolarEdge Technologies Inc.: Manufactures and sells solar ingots, wafers, cells, modules, and other solar power and battery storage products globally. The company’s DC optimized inverter systems maximize power generation in solar installations while enhancing overall system efficiency. Its products cater to residential, commercial, and utility-scale projects. In August, the company unveiled a new Home Hub and Wave inverters with an integrated power control system to reduce solar-panel installation costs.
- Hannon Armstrong Sustainable Infrastructure Capital Inc.: Provides capital and services to the energy efficiency, renewable energy, and other sustainable infrastructure markets in the U.S. More specifically, the company invests in a diversified portfolio including energy efficiency, renewable energy, and other sustainable projects. In May, the solar funding company announced a $300 million public offer of common stock for general corporate purposes.
Solar Stocks with the Most Momentum
The solar stocks presented in the table below have delivered the highest total return over the past year. Many momentum investors believe stocks that are outperforming their sector peers will continue to offer superior returns in the future.
| Solar Stocks with the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| First Solar Inc. (FSLR) | 199.8 | 21.3 | 69.0 |
| Array Technologies Inc. (ARRY) | 21.3 | 3.2 | -7.1 |
| Shoals Technologies Group Inc. (SHLS) | 20.7 | 3.5 | -17.5 |
| Russell 1000 Index | N/A | N/A | 10.5 |
| Invesco Solar ETF (TAN) | N/A | N/A | -34.1 |
Source: YCharts
- First Solar Inc.: Provides photovoltaic (PV) solar energy products globally. It manufactures and markets cadmium telluride solar modules that convert sunlight into electricity. First Solar’s key customers include developers and operators of systems, utilities, independent power producers, and commercial and industrial companies. The solar heavyweight recently announced plans to open its fifth American manufacturing plant in Louisiana.
- Array Technologies Inc.: Specializes in solar tracking systems for utility-scale projects. The company’s products optimize solar-panel orientation, enhancing energy output. Array Technologies’ designs seek to provide reliability, efficiency, and minimal maintenance. Array Technologies’ top line grew 21% in its most recent quarter, driven by 124% YOY growth in its STI segment, a recent acquisition that manufactures and sells solar trackers.
- Shoals Technologies Group Inc.: Provides electrical balance of systems (eBoS) products for solar energy projects. The company manufactures critical components such as combiner boxes, wiring harnesses, and junction boxes. Shoals’ products aim to contribute to efficient and safe solar installations. In July, Shoals Technologies announced the commercial availability and successful field deployments of its Snapshot I-V health monitoring products that integrate into a solar asset management system.
Advantages of Investing in Solar Stocks
Growing renewable energy demand: Solar stocks are positioned to benefit from increasing global demand for renewable energy sources. As concerns about climate change and environmental sustainability continue to gain momentum, governments, corporations, and individuals are actively seeking cleaner alternatives to traditional fossil fuels. Vantage Market Research projects the global solar panel market to reach $264 billion by the end of the decade and to have a compound annual growth rate (CAGR) of 8.2% between 2023 and 2030. Growing demand for solar energy translates directly into increased demand for solar technology and infrastructure, bolstering the prospects of companies operating within the solar sector. As governments implement policies that promote the adoption of renewable energy sources, solar stocks could experience significant growth, making them an attractive investment choice.
Decreasing costs and technological advancements: Solar stocks stand to benefit from solar technology cost reductions and new technological advancements in the sector. The U.S. Department of Energy (DOE) plans to reduce the cost of solar energy by 60% within the next eight years and to inject $128 million into the sector to lower costs, improve performance, and accelerate the rollout of solar energy technologies. Over the past decade, the cost of solar panels and associated equipment has significantly dropped, making solar power more competitive with traditional energy sources. Technological innovations in areas such as panel efficiency, energy storage products, and grid integration are enhancing the overall effectiveness of solar systems. These advancements not only make solar energy more accessible to a broader range of consumers but also position solar companies for higher profitability as their operational efficiencies improve.
Limitations of Investing in Solar Stocks
Dependence on government policies and incentives: Solar stocks remain susceptible to fluctuations in government policies and incentives that promote renewable energy adoption. Changes in subsidies, tax credits, or regulations can significantly affect the economics of solar projects and the demand for solar technology. Sudden shifts in political priorities or budget allocations may lead to uncertainty and alter the sector’s growth, affecting investor confidence and potentially causing stock price volatility.
Technological and infrastructure challenges: While solar technology has made significant progress, it still faces limitations. The efficiency of solar panels, for instance, remains debatable, as converting sunlight into electricity isn’t always as efficient as desired. For instance, fossil fuels have an efficiency rate around 20% to 40% compared with solar panels providing an efficiency rating of between 15% and 22%, according to data on the ConsumerAffairs website. This can affect the overall profitability of solar companies and their ability to compete with other forms of energy generation. Moreover, the need for extensive infrastructure to harness solar power, including storage systems and distribution networks, often requires significant investment. These challenges may hinder the growth of solar companies, especially in regions where the necessary infrastructure is lacking or underdeveloped.
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As of the date this article was written, the author does not own any of the above stocks or ETFs.
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