Global Solar Energy Market
Solar systems utilize photovoltaic effects to capture and convert solar radiation into forms of energy that can be used for residential, commercial, industrial, and even utility-scale applications. According to a report by Precedence Research, the global solar energy systems market is valued at $255.40 billion in 2024. It is expected to reach around $1.14 trillion by 2034, growing at a CAGR of 16.4%. The solar energy systems market has experienced rapid growth and transformation in recent years due to increasing global awareness of sustainable and renewable energy sources.
The Asia Pacific region dominates the market and is poised for continued growth as governments and industries focus on meeting renewable energy targets. India aims to attain 450 GW of renewable capacity by 2030 and is expected to propel the market growth in the region. According to the International Energy Agency, within 20 years, solar power in India is expected to surpass coal’s proportion in the country’s power-generating mix.
A combination of technological advancements, environmental concerns, supportive policies, and increasing consumer demand for clean and sustainable energy sources drives the growth in the North American region. The United States has seen substantial growth in residential and utility-scale solar installations and is a leading player in the North American solar energy market. In 2022, the United States added 14.1 GWh of energy storage to the electrical grid, a 34% year-over-year increase.
Governments worldwide have implemented supportive policies and financial incentives such as tax credits, subsidies, grants, feed-in tariffs, and net metering programs, which are key growth drivers in the solar panel market. However, cost and grid integration has been a major restraint for the market growth as the excess solar energy should either be transmitted back into the grid or stored in batteries for later use. Integrating solar energy into existing energy networks is technically challenging. It necessitates infrastructure to handle two-way energy flows while the costs of establishing large-scale energy storage systems are quite high, which limits the overall economic sustainability of solar energy systems.
Investment in Solar Energy Signals Bullish Outlook
BlackRock, one of the largest asset management companies in the world, is bullish on the solar market and recognizes the critical role solar energy plays in the transition to a low-carbon economy. The bank forecasts that the solar market will continue to grow rapidly in the coming years due to declining costs, increasing demand for renewable energy, and supportive government policies.
In June, the company invested $500 million in Recurrent Energy. The company has a global project development pipeline of 26 GW in solar and 56 GWh in storage and is expected to have 4 GW of solar and 2 GWh of storage in operation in the U.S. and Europe by 2026.
The company’s investment in Recurrent Energy will support its continued growth and development, enabling it to advance its high-value project development portfolio and transition from a pure developer to a developer plus long-term owner and operator in select markets. This investment also underscores its commitment to supporting companies driving innovation and growth in the solar industry.
The solar energy systems market is poised for rapid growth over the next decade, driven by increasing demand for sustainable energy sources and supportive government policies. While cost and grid integration challenges remain, technological advances and economies of scale are expected to drive down costs and improve efficiency. With that in context, let’s take a look at the 7 cheap solar stocks to buy according to hedge funds.
A bird’s eye view of a sprawling solar facility in the Northeastern US, glimmering in the sun.
Our Methodology
To compile our list of 7 cheap solar stocks to buy according to hedge funds, we used clean energy ETFs, online rankings, and stock screeners to compile an initial list of 20 solar energy stocks. From that list, we screened for companies that are trading at a forward P/E ratio of under 20, as of September 22. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
7 Cheap Solar Stocks To Buy According To Hedge Funds
7. NextEra Energy Partners (NYSE:NEP)
Number of Hedge Fund Investors: 20
Forward P/E Ratio as of September 22: 11.23
NextEra Energy Partners (NYSE:NEP) is a publicly traded subsidiary of NextEra (NYSE:NEE). The company’s primary focus is on acquiring and managing clean energy projects across North America, and it has a diverse portfolio of wind and solar projects.
In Q2, NextEra Energy Partners (NYSE:NEP) added over 3,000 megawatts (MW) of new renewable energy projects. The new additions bring NextEra Energy Resources’ total backlog to approximately 22.6 gigawatts (GW), solidifying its position as a leader in the solar and renewables industry. Notably, 860 MW of the new projects come from agreements with Google to meet its data center power demand. NextEra Energy Partners’ (NYSE:NEP) solar portfolio is the largest in the United States and is going through a significant expansion.
On July 24, NextEra Energy Partners (NYSE:NEP) announced a 1.4% increase in its quarterly dividend, bringing it to $0.905 per share. This growth is underpinned by the company’s strong cash-generation capabilities. In the second quarter of 2024, NextEra Energy Partners’ (NYSE:NEP) cash available for distribution (CAFD) rose to $220 million, up from $200 million in the same quarter last year. Additionally, the company’s operating cash flow for the year’s first half increased to $309 million, compared to $296 million in the same period last year.
NextEra Energy Partners (NYSE:NEP) is trading 11.23 times its forward-year earnings, which represents a 38% discount to the sector median of 18.13. The company’s earnings are expected to grow by 2.26% this year. As of the end of the second quarter, 20 hedge funds held stakes in the company worth $71.16 million. Industry analysts have a consensus Buy rating on the stock, with an average share price target of $28.31, indicating a potential upside of 15.7% from its current level.
6. Eversource (NYSE:ES)
Number of Hedge Fund Investors: 26
Forward P/E Ratio as of September 22: 14.73
Eversource (NYSE:ES) is a leading energy provider in New England. It operates through several subsidiaries, including Connecticut Light and Power, NSTAR Electric, Public Service Company of New Hampshire, and Aquarion Company. With over 4 million customers, the company offers various services, including electric, gas, and water.
On July 4, Eversource (NYSE:ES) announced a community solar project in its service territory, Enfield Solar One, through the Connecticut Statewide Shared Clean Energy Facility (SCEF) Program. This project is the largest community solar project in Connecticut. The project will provide electricity to over 700 customers and help the company develop and implement cost-effective clean energy solutions, which can increase revenue.
Eversource’s (NYSE:ES) stock is currently trading at a forward price-to-earnings ratio of 14.73, representing an 18.76% discount to the sector median of 14.73. Analysts have a consensus Buy rating on the stock, with an average share price target of $73.26, indicating a potential upside of 8.7% from current levels. As of the second quarter, 26 hedge funds hold a stake in Eversource’s (NYSE:ES) worth $622.20 million, with Zimmer Partners being the largest shareholder, owning stocks valued at $303.36 million as of June 30.
5. Array Technologies (NASDAQ:ARRY)
Number of Hedge Fund Investors: 30
Forward P/E Ratio as of September 22: 9.63
Array Technologies (NASDAQ:ARRY) is a manufacturer and supplier of single-axis trackers for solar panels. These trackers enable solar panels to track the sun’s movement throughout the day and help optimize energy production and efficiency by maximizing exposure to sunlight.
In Q1, Array Technologies (NASDAQ:ARRY) launched the innovative Hail Alert Response system, which is designed to enhance the resilience and durability of solar trackers by leveraging advanced weather prediction algorithms. The system automatically stows solar trackers approximately 30 minutes before a predicted hail event, minimizing potential damage and downtime and is compatible with the company’s existing product portfolio. The Hail Alert Response system requires a SmarTrack Controller to function, which provides an integrated and proactive approach to protecting solar assets from severe weather conditions.
In February, Array Technologies (NASDAQ:ARRY) announced a strategic partnership with Alpuco in Saudi Arabia aimed at sourcing materials locally. This collaboration enables the company to capitalize on domestic incentives and solidifies its presence in the Middle Eastern market. The region is poised for significant growth, with an expected addition of nearly 70 GW of photovoltaic capacity by 2030. Saudi Arabia, in particular, has set an ambitious target of 130 GW of renewable energy by 2030. This partnership has the potential to significantly drive Array Technologies’ market expansion and bolster its order book.
Array Technologies (NASDAQ:ARRY) trades 9.63 times its earnings, representing a 48.70% discount to the sector median of 18.77. As of the second quarter, 30 hedge funds held a stake in the company, with a combined value of $396.77 million. Hill City Capital is the largest shareholder in the company and owns stocks worth $136.61 million as of June 30.
Additionally, analysts have a consensus Buy rating on the stock, with an average price target of $13.73, indicating a potential upside of 72.7% from current levels.
4. Shoals Technologies (NASDAQ:SHLS)
Number of Hedge Fund Investors: 33
Forward P/E Ratio as of September 22: 16.94
Shoals Technologies (NASDAQ:SHLS) focuses on solar energy and electric vehicle solutions. The company has successfully deployed its products in more than 62 GW solar systems worldwide and has an impressive intellectual property portfolio with over 66 patents. Shoals Technologies (NASDAQ:SHLS) is particularly known for its innovative electrical balance of systems (EBOS) solutions, which have set a new standard in the industry.
Shoals Technologies’ (NASDAQ:SHLS) innovative Big Lead Assembly (BLA) System represents a significant advancement in solar installation technology. It integrates multiple components into a single, streamlined unit. By minimizing the need for combiner boxes and wiring, the BLA System offers a 43% reduction in installation costs and a 20% reduction in material costs. This innovative solution not only enhances efficiency but also improves safety, setting a new benchmark for electrical balance of systems (EBOS) solutions.
Shoals Technologies (NASDAQ:SHLS) has developed various innovative solutions to streamline solar and electric vehicle (EV) installations. The company’s Interconnect System is designed to simplify the connection of solar panels to the grid, minimizing the need for specialized labor and enhancing overall efficiency and reliability. Additionally, Shoals Technologies’ (NASDAQ:SHLS) patented connectors and wire harnesses with in-line fuses offer a cost-effective solution for solar installations, reducing production and transportation costs.
Shoals Technologies (NASDAQ:SHLS) trades at a price-to-earnings (P/E) ratio of 16.94, a 15.19% discount compared to the sector median of 19.98. As of the second quarter, a total of 33 hedge funds hold a stake in the company, with a combined value of $208.17 million. Joho Capital is the largest shareholder and holds stocks worth $60.16 million as of June 30..
3. Nextracker (NASDAQ:NXT)
Number of Hedge Fund Investors: 39
Forward P/E Ratio as of September 22: 11.84
Nextracker (NASDAQ:NXT) is a leading provider of solar tracking solutions, catering to both utility-scale and distributed generation projects. Since its successful initial public offering in 2023, the company has delivered impressive double-digit returns, driven by its dominant market position and the robust growth of the solar energy industry.
In February, Nextracker (NASDAQ:NXT) was selected by ACWA Power and Larsen & Toubro to provide its all-terrain tracker NX Horizon-XTR for the 1.17 GW Al Kahfah solar power project in Saudi Arabia. The company will supply its NX Horizon-XTR tracker systems, which are designed to optimize energy output by following the sun’s movement to maximize energy production. Nextracker (NASDAQ:NXT) will also support the project with local partners in Saudi Arabia by providing raw materials and manufacturing support for the trackers. This 1.17 GW order brings Nextracker’s (NASDAQ:NXT) total capacity of smart solar trackers in the Middle East, India, and Africa region to over 10 GW, including both operational and currently under-development projects.
Nextracker (NASDAQ:NXT) is well-positioned to capitalize on the increasing demand for solar tracking solutions. According to a report by Precedence Research, the global solar tracker market is valued at $7.01 billion in 2024 and is expected to reach around $71.81 billion by 2034, expanding at a CAGR of 26.2%. The company’s stock trades at a forward price-to-earnings ratio of 11.84, representing a 40.73% discount compared to the sector median of 19.98.
Moreover, analysts have a consensus on the stock’s Buy rating, setting an average share price target at $59.44, representing a 47% upside potential from its current level. As of the second quarter, the stock is held by 39 hedge funds worth $672.68 million.
2. Pacific Gas & Electric (NYSE:PCG)
Number of Hedge Fund Investors: 46
Forward P/E Ratio as of September 22: 14.78
Pacific Gas & Electric (NYSE:PCG) is a major energy provider in Northern and Central California, serving 16 million people. In 2023, the company achieved 100% clean electricity with a mix of sources, including nuclear power (53%), renewable resources (34%), and hydroelectric power (13%). Additionally, it has invested heavily in battery storage, adding over 2,100 megawatts to its capacity.
Pacific Gas & Electric’s (NYSE:PCG) solar business is the largest component of its renewable energy mix. The company has over 6,000 MW of renewable energy capacity through more than 260 power purchase agreements and owns 430 MW of eligible renewable generation, including 13 solar generation plants that generate up to 153 MW. Additionally, the company invests heavily in battery energy storage systems, with over 3.5 GW under contract, to enhance grid reliability and integrate more renewables.
By harnessing the power of solar energy and leveraging battery storage, Pacific Gas & Electric (NYSE:PCG) is well positioned to capture electricity demand from California’s data centers and electric vehicles, with over 1.1 million EVs and 15,000 charging stations, particularly in Silicon Valley, where it operates a largely renewable-powered grid and advanced fiber network. Pacific Gas & Electric’s (NYSE:PCG) grid is expected to see increased utilization, rising from 45% to 80% by 2040.
Pacific Gas & Electric (NYSE:PCG) is well-positioned to capitalize on the increasing demand for energy, driven in part by the growing electric vehicle (EV) and artificial intelligence (AI) industries. The company’s stock trades at a forward price-to-earnings ratio of 14.78, representing an 18.47% discount compared to the selector median of 18.13. Analysts forecast the company to increase its earnings by 10% increase this year.
As of the second quarter, 46 hedge funds hold a combined stake in the company valued at $2.00 billion, with Third Point as the largest shareholder, holding stocks worth $938.47 million as of June 30.
1. First Solar (NASDAQ:FSLR)
Number of Hedge Fund Investors: 66
Forward P/E Ratio as of September 22: 17.79
First Solar (NASDAQ:FSLR) focuses on manufacturing thin-film photovoltaic (PV) solar panels for large-scale solar power projects. The company has a global presence and operates facilities in Vietnam and Malaysia.
In Q2, First Solar’s (NASDAQ:FSLR) revenue rose by 24.7% to $1.01 billion, with EBITDA skyrocketing 95% year-over-year to $470 million due to increased selling prices and enhanced gross margin of 49.4%. The company boasts a robust order backlog extending through 2030, driven by strong product demand.
First Solar (NASDAQ:FSLR) is currently in the patent application process for its innovative TOPCon technology, which is anticipated to improve the efficiency of its solar panels. If successful, the patent could unlock a new revenue stream through royalties, further strengthening the company’s financial standing and providing a potential long-term growth catalyst. First Solar (NASDAQ:FSLR) has recently completed an upgrade at its Ohio facility and is building new sites in Louisiana and Alabama, which are expected to nearly double its US production capacity, enabling it to meet the surging demand for solar energy better.
First Solar (NASDAQ:FSLR) is currently trading at a relatively attractive valuation, with a price-to-earnings ratio of 17.79, representing a 9.18% discount to the sector median of 23.61. Analysts forecast the company to grow its earnings by 54.85% this year. As of the second quarter, 66 hedge funds own stakes in the company valued at $1.68 billion. Samlyn Capital is the largest shareholder, with stakes worth $240.78 million.
While we acknowledge the potential of First Solar (NASDAQ:FSLR) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FSLR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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