Tread Lightly: Most Solar Stocks Love Biden, But Not All of Them

Solar energy will likely catch a healthy bid in 2021 with a new administration focused on encouraging renewable energy. But not all solar firm stocks will benefit.

Goldman Sachs [$GS] axed First Solar’s [$FSLR] rating down to a Sell with an $81 price target, seeing a 16% drop from Monday’s closing price after jumping 61% in 2020. Simultaneously, Goldman upped Enphase Energy [$ENPH] to a Buy with a $232 price target, a 32% gain from Monday’s close after increasing 513% in 2020.

“It’s a tale of two growth stories”, the bank said. First Solar’s earnings and revenue have already topped for this cycle, Goldman analyst Brian Lee said in a note on Monday. Margins are expected to touch highs in the first half of 2021. Here’s Why Plug Power Has Gone Parabolic Since June

First Solar is estimated to report year-end 2020 profit of $3.62 a share, but the outlook for year-end 2021 is $3.44. Year-end revenue is forecasted to be $2.8 billion, which is running marginally below the $3 billion forecast for year-end 2021.

Desert oasis: The plant’s 8 million solar panels power about 160,000 California homes

Goldman sees ebbs in earnings per share for First Solar starting next year, “further exacerbated by weaker industry pricing moving through next year, as we see the supply-demand dynamic in modules as one of the more challenged areas of the supply chain in the near-to-medium term.” Imagine Owning This Energy Stock Throughout The Pandy

Shares of the Tempe, Arizona-based panel maker fell 9% to $92.16 on Tuesday, compared to a 0.7% gain in the S&P 500 index. Conversely, Enphase is in an earlier stage of growth, Lee said. Its market could swell to $14 billion from $2 billion, with annual growth in earnings per share of about 56%. Shares of Enphase crept up 5.3% to $181.48 on Tuesday.

Canadian Solar [$CSIQ] carries a Neutral rating at Goldman, which elevated its price target on the stock to $48 from $43. The analyst projects 2020 earnings per share of $1.27, falling to 35 cents for 2021. Shares of Canadian Solar tumbled 4% to $50.52 on Tuesday.

According to the U.S. Energy Information Administration, in 2018 the United States generated nearly 17% of electricity from renewable energy sources. Renewable Energy would be providing for 80% of U.S. electricity by 2050. Today solar power is the third most profound source of renewable resources after Hydropower and wind power, respectively.

Goldman remains positive on solar stocks, especially given the policy backing by the incoming Biden administration, who has committed to spend $2 trillion on renewable energy initiatives, including the installation of 500 million panels by 2026. QuantumScape is Up 593% Since October; Normal?

What’s more, Congress’ newly approved spending authorization extended a solar investment tax credit. Global solar installations are predicted to snowball 18% this year and an average of 17% annually through 2024. Supply (an additional 120 gigawatts) is seen outpacing new demand (25 gigawatts), a potential risk. One gigawatt can power about 750 homes.

Goldman noted that solar stocks did better than historical averages last year, especially in Q3, because of the swift “V-shaped recovery” in the U.S. market, optimism around the potential for policy catalysts, and the expectations for faster solar volume growth under a Biden administration, Goldman’s Lee mentioned in the note. “We believe the current set up, combined with momentum in demand, is likely to keep investor sentiment largely positive heading into 2021,” he said. Nikola is Officially a Nonstarter

Most renewable energy projects are dependent on low interest rates to be financially viable. A wind or solar development, for example, requires a large upfront investment and then generates revenue from electricity sales over the course of decades. Lower interest rates mean less revenue is gobbled up by interest payments and, therefore, each project is more valuable.

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