In this piece, we will take a look at the 10 Best Solar Energy Stocks to Invest In.
Favorable costs and government policies have driven growth in the solar industry over the last decade. However, things took an unexpected turn as the overall sector came under pressure in 2023 due to the high interest rate environment, making it difficult and expensive to acquire cheap capital to accelerate growth. Tighter financing and policy shifts contributed to the more than 100 bankruptcies experienced in the solar sector.
Billed as one of the biggest markets in the solar industry, California was one of the hardest hit owing to the new net metering rules that barred people from accumulating credits higher than annual consumption. The fact that NEM 3.0 results in much lower compensation for electricity customers has resulted in reduced system economics, significantly affecting the sector. The policy change was one of the factors behind an 80% decrease in rooftop installation volume.
While demand for solar energy continues to grow owing to the transition to cleaner energy sources, solar industry stocks have remained under pressure. Solar stocks experienced an average drop of about 30%, underperforming the S&P 500, up by more than 20%. The underperformance could be attributed to, among other things, the policy shifts that affected most of the company’s operations, resulting in some filing for bankruptcy. The high interest rates made the business untenable, given the high borrowing costs.
Fast forward, the outlook remains strong and in favor of solar stocks. The 10 best solar energy stocks to invest in are companies well positioned to benefit as the US Federal Reserve moves to cut interest rates. Lower interest rates should result in affordable borrowing costs that should allow the companies to borrow in a bid to ramp up their operations, either on the installation of solar panels or manufacturing to meet growing demand. Additionally, lower interest rates amid declining inflation should bolster consumer purchasing power, making it easier for most of them to invest in installing solar panels, which should benefit the sector.
Given that less than 4% of all US power generation comes from solar, the growth opportunities are tremendous as more people and businesses push for clean energy. Over the next two years, solar and wind energy are expected to be the driving force behind US power generation. Likewise, solar power generation is expected to grow by 75% to 286 billion KWh by 2025 from 163 billion kilowatt-hours in 2023
The expected growth has to do with solid solar demand as power demand surges and outpaces the growth of other electricity sources. The fact that solar energy accounted for just 3.9% of the nation’s power grid in 2023 underscores the tremendous opportunities for growth for the ten best solar energy stocks to buy right now amid the transition from fossil fuels.
Last year alone, there were just over 1,000 gigawatts of solar power seeking grid connectors, up 14 times the 79 gigawatts of natural gas. Solar demand continues to outpace other energy sources partly because it is becoming cheap. For instance, solar for large utility projects costs between $29 and $92 per megawatt hour compared to costs of between $45 and $108 for combined cycle gas plants.
In addition to reduced costs, solar panel technology has improved significantly, characterized by greater solar efficiency fueling commercial customer demand. While solar panels could only convert 10% of the sunlight they captured, technological advancement has given rise to panels with conversion efficiencies that exceed 25%. Since photovoltaic systems can now convert a quarter of their sunlight, solar energy has become an attractive option for homeowners and businesses.
Given the cost benefits, the US solar market is growing at a compound annual growth rate of 16.48% and is projected to hit highs of 352 gigawatt-hours over the next five years (according to estimates by Mordor Intelligence). Declining solar panel costs and supportive government policies should be the catalyst driving the growth. Amid the growth, demand for solar microinverters, devices used to convert DC energy produced by solar panels into AC energy, is expected to grow.
While robust growth in the US solar market presents tremendous investment opportunities, the threat Chinese companies pose cannot be ignored. China has already unveiled its solar energy might, having installed more solar panels in 2023 than the US has in history. The country accounts for 80% of the global solar panel market share. The push into solar and wind energy is part of China’s push to be carbon neutral by 2060.
Faced with the threat of cheaper imports, the US has already introduced subsidies to counter China in producing more affordable solar panels. In addition, it has increased the tariff rate for solar cells from 25% to 50% to protect local manufacturers from cheaper Chinese imports.
Similarly, Microinverters have become indispensable components driving solar power systems’ efficiency, reliability, and flexibility. They are increasingly being installed at the level of individual panels to offer independent optimization, reduced power losses, and enhanced monitoring capabilities. The installation of each panel has been one of the factors fueling demand on a global scale. Likewise, the demand for solar microinverters is growing at a CAGR of 18.1%, and it is projected to hit highs of $5.7 billion by 2032, according to estimates by Future Market Insights.
The economic argument for solar energy as an alternative energy source has strengthened recently as big tech companies seek clean energy to power their data centers. The artificial intelligence revolution has triggered a strong demand for power as most of its operations are power intensive. Consequently, tech giants have been investing in solar and wind power to ensure a reliable supply of clean energy away from fossil fuels.
Tech giants represent nearly 40% of the demand for clean energy for utility-scale projects in the US. Likewise, demand from these companies is expected to grow exponentially as artificial intelligence operations in data centers require ten times more electricity than a typical data center. The expected and strong demand for clean energy is one reason to be bullish about solar energy stocks.
Our Methodology
While solar energy is expected to make up 58% of new electricity generation installed in the US in 2024, exciting investment opportunities should crop up. To compile our list of the 10 best solar energy stocks to invest in, we used the top 20 stock picks of the Invesco Solar ETF (NYSE:TAN) ETF that are traded on American stock exchanges and ranked them based on their upside potential. We also mentioned the number of hedge funds that had bought these stocks in Q1.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Solar Energy Stocks to Invest In
10. Enphase Energy, Inc. (NASDAQ:ENPH)
Hedge Funds Holding Stakes: 41
Upside potential as of August 2, 2024: 15%
Enphase Energy, Inc. (NASDAQ:ENPH) is a technology company in the burgeoning solar energy sector, specializing in providing smart, user-friendly solutions for managing solar generation. It also offers Microinverters for the rooftop solar market.
Enphase Energy, Inc. (NASDAQ:ENPH) is one of the most prominent players in micro inverter technology, as it also offers a fully integrated solar plus storage solution. It is also diversifying its footprint by selling home energy solutions such as energy storage solutions, electrical vehicle charging, and digital installation services. Enphase Energy, Inc. (NASDAQ:ENPH) boasts a 28% three-year average sales growth and a five-year return of 389%, topping 86% for the S&P 500.
As of the end of Q1 2024, 41 out of 920 hedge funds tracked by Insider Monkey held stakes in the company. Based on 26 Wall Street analysts, Enphase Energy, Inc. (NASDAQ:ENPH) is rated as a ‘Buy” and boasts an average price target of $126.22, implying a 15% upside potential.
9. Daqo New Energy Corp. (NYSE:DQ)
Hedge Funds Holding Stakes: 16
Upside potential as of August 2, 2024: 16.22%
Daqo New Energy Corp. (NYSE:DQ) is among the 10 best solar energy stocks for diversifying an investment portfolio. The company plays a vital role in providing the necessary materials to manufacture solar panels.
The Chinese company mines polysilicon, a key ingredient in solar panels, making it an important player in the solar sector. Additionally, it is billed as one of the world’s lowest-cost producers. While Daqo New Energy Corp. (NYSE:DQ) has dropped by about 33%, it is trading at a discount.
As of Q1 2024, 16 out of 920 hedge funds tracked by Insider Monkey held stakes in Daqo New Energy Corp. (NYSE:DQ). Based on 4 Wall Street analysts, the company commands an average price target of $18.70, implying a 16.22% upside potential from current levels.
8. Sunrun Inc. (NASDAQ:RUN)
Hedge Funds Holding Stakes: 37
Upside potential as of August 2, 2024: 17%
Sunrun Inc. (NASDAQ:RUN) is one of the leading providers of residential solar storage and entry services, affirming its edge as one of the 10 best solar energy stocks to invest in. The company maintains operations in 22 US states offering solar energy systems and products, including panels for capturing solar energy, and boasts of a three-year average sales growth of 26.6%.
Sunrun Inc. (NASDAQ:RUN)’s long-term goal is to become a provider of whole-home electrification rather than focusing on home solar. In this case, it should offer home batteries, electric vehicle charging, and grid services. While the stock has been down by about 15% over the past five years, it remains a solid pick, given its exposure to the installation of solar panels.
37 out of 920 hedge funds tracked by Insider Monkey held stakes in Sunrun Inc. (NASDAQ:RUN) as of the end of the first quarter. The stock is currently rated as a ‘Buy’ on Wall Street with an average price target of $20.50, implying a 17% upside potential from current levels.
7. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Hedge Funds Holding Stakes: 10
Upside potential as of August 2, 2024: 23.41%
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is billed as the largest solar company in the world by revenue, having generated $4.6 billion in sales last year. It is one of the 10 best solar energy stocks to invest in for investors eyeing exposure in the Chinese solar energy market, where it has its base.
JinkoSolar Holding Co., Ltd. (NYSE:JKS) primarily develops and produces photovoltaic products. It is expanding its footprint into Saudi Arabia, planning to set up a factory as part of a $1 billion joint venture.
According to the Insider Monkey database, the number of hedge funds holding stakes in JinkoSolar Holding Co., Ltd. (NYSE:JKS) dropped to 10 in Q1 2024 from 13 as of the end of last year. Based on 3 Wall Street analysts, JinkoSolar is rated as a ‘Buy’ with an average price target of $24.67, representing a 23.41% change from current levels.
6. First Solar, Inc. (NASDAQ:FSLR)
Hedge Funds Holding Stakes: 51
Upside potential as of August 2, 2024: 29%
First Solar, Inc. (NASDAQ:FSLR) is one of the biggest players in the US solar market, specializing in offering solar energy solutions to large-scale developers and operators. The company manufactures and sells photovoltaic solar modules that provide lower-carbon alternatives.
First Solar, Inc. (NASDAQ:FSLR) is one of the 10 best solar energy stocks to invest in as its focus on bigger customers instead of residential customers allows it better weather volatility and storms in the solar energy sector. The company delivered solid Q2 2024 results, with revenues increasing by $0.2 billion to $1 billion as earnings improved to $3.25 from $2.20 a share a year ago.
According to the Insider Monkey database, the number of hedge funds holding stakes in First Solar, Inc. (NASDAQ:FSLR) increased to 51 in Q1 2024 from 47 in Q4 2023. Based on 25 Wall Street analysts, the stock boasts an average price target of 283.57, implying a 29% upside potential.
5. Sunnova Energy International, Inc. (NYSE:NOVA)
Hedge Funds Holding Stakes: 20
Upside potential as of August 2, 2024: 35.42%
Sunnova Energy International, Inc. (NYSE:NOVA) is one of the smallest companies in the solar energy sector, serving a customer base of about 386,000. Nevertheless, the company has carved a niche in providing and installing solar arrays and other energy solutions for homeowners and small businesses.
Analysts expect Sunnova Energy International, Inc. (NYSE:NOVA) to generate over $1 billion in sales in 2024, up 36% year over year on improving consumer spending due to low interest rates. This affirms why it is one of the ten best solar energy stocks to invest in. Sunnova Energy International, Inc. (NYSE:NOVA) can quickly generate billions of sales with its three-year average sales growth of 60.9%.
A total of 20 hedge funds held stakes in the company as of Q1 2024, down from 29, according to Insider Monkey’s database. Analysts on Wall Street currently rate Sunnova Energy International, Inc. (NYSE:NOVA) as ‘Buy’ with an average price target of $11.24, which implies an upside of 35.42% from current levels.
4. Canadian Solar Inc. (NASDAQ:CSIQ)
Hedge Funds Holding Stakes: 11
Upside potential as of August 2, 2024: 65.41%
Canadian Solar Inc. (NASDAQ:CSIQ) is for investors who are eyeing exposure in the Canadian solar market. As a technology company, it develops solar energy and battery energy storage products and solutions.
Canadian Solar Inc. (NASDAQ:CSIQ) delivered net revenues of $1.33 billion in Q1 2024, and gross margins improved to 19% from 18% a year ago. The company is projecting $1.7 billion in sales in Q2. While the stock has been trading sideways in recent weeks, it is down by about 40%, making it a discount play among the ten best solar energy stocks to invest in.
Based on 6 Wall Street analysts offering 12-month price targets for Canadian Solar Inc. (NASDAQ:CSIQ) in the last three months, the average price target is $25.88, with a high forecast of $43.00 and a low forecast of $12.28. The average price target represents a 65.41% change from the last price of $16.58. 11 out of 920 hedge funds tracked in the Insider Monkey database held stakes in Canadian Solar Inc. (NASDAQ:CSIQ) as of the end of the first quarter.
3. Array Technologies, Inc. (NASDAQ:ARRY)
Hedge Funds Holding Stakes: 30
Upside potential as of August 2, 2024: 71%
Array Technologies, Inc. (NASDAQ:ARRY) is a unique solar investment player as it manufactures and sells ground tracking systems for solar energy projects. Its flagship product is DuraTrack HZ v3, a single-axis tracker with a tracker system that delivers a lower energy cost. Its technology is increasingly used to turn solar panels towards the sun and move across the sky. Array Technologies, Inc. (NASDAQ:ARRY) delivered solid Q1 results, with revenues at $153.4 million, beating estimates of $140.1 million.
While the stock is down by about 35% for the year, analysts remain bullish about its long-term prospects, given the robust sales growth. Array Technologies, Inc. (NASDAQ:ARRY) boasts an average price target of $17.66, implying a 71% upside potential from current levels. According to Insider Monkey, 30 hedge funds held stakes in the company as of the end of the first quarter of 2024.
2. Shoals Technologies Group, Inc. (NASDAQ:SHLS)
Hedge Funds Holding Stakes: 32
Upside potential as of August 2, 2024: 82%
While operating as a technology company, Shoals Technologies Group, Inc. (NASDAQ:SHLS) offers solutions and components for solar battery energy and electric vehicle charging. The company has already inked a strategic partnership with Create Energy to construct a 5GW solar modules factory in the US.
The new factory will allow Shoals Technologies Group, Inc. (NASDAQ:SHLS) to take advantage of the opportunities around solar manufacturing thanks to the production tax credits for manufacturers and investment tax credits. While the stock is down by 60% for the year, it is currently rated as a ‘Buy’ with a $12.38 price target, implying 82% upside potential from current levels. As of the end of Q1 2024, 32 out of 920 hedge funds tracked by Insider Monkey held stakes in Shoals Technologies Group, Inc. (NASDAQ:SHLS).
1. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Hedge Funds Holding Stakes: 17
Upside potential as of August 2, 2024: 88%
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is one of the 10 best solar energy stocks to invest in to gain exposure to the burgeoning solar microinverter landscape. The company designs, manufactures and sells optimized inverter systems that enable the generation of optimized solar energy from solar photovoltaic installations.
SolarEdge Technologies, Inc. (NASDAQ:SEDG) boasts a diversified product line that includes inverters, power optimizers, and cloud-based monitoring systems. While the company initially targeted the residential market, it currently addresses the needs of the commercial market. While SolarEdge Technologies, Inc. (NASDAQ:SEDG) is down by about 20%, it offers a three-year average sales growth of 15.9%.
The number of hedge funds that hold stakes in SolarEdge Technologies, Inc. (NASDAQ:SEDG) dropped to 17 in Q1 2024 from 32 as of the end of last year, according to Insider Monkey. Based on 25 Wall Street analysts, SolarEdge boasts an average price target of $49.95, implying 88% upside potential from current levels.
The 10 best solar energy stocks to invest in offer exposure to the burgeoning solar energy sector amid the transition into clean, renewable energy. However, given that the artificial intelligence arms race is just starting, under-the-radar AI stocks are trading at highly discounted valuations with greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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