In this article, we will look at the 7 Most Undervalued Solar Stocks to Buy According to Analysts.
Global Solar Energy Market Poised for Explosive Growth
According to a report by Precedence Research, the global solar energy systems market is valued at $255.40 billion in 2024 and is projected to grow to $1.14 trillion by 2034 at a CAGR of 16.4%. The market has undergone significant transformation in recent years, driven by the increasing global focus on sustainable and renewable energy sources. Governments worldwide have implemented policies and incentives, such as tax credits, subsidies, and net metering programs, which are driving growth in the solar panel market.
However, the market faces challenges related to cost and grid integration, as excess solar energy must be either transmitted back into the grid or stored in batteries. Integrating solar energy into existing energy networks is technically complex and requires infrastructure to handle two-way energy flows, while the costs of establishing large-scale energy storage systems are high, limiting the economic sustainability of solar energy systems.
The North American region is experiencing growth fueled by technological advancements, environmental concerns, supportive policies, and increasing consumer demand for clean and sustainable energy. The United States is a leading player in the North American solar energy market, with substantial growth in residential and utility solar installations. In 2022, the country added 14.1 GWh of energy storage to the electrical grid, marking a 34% year-over-year increase.
However, the Asia Pacific region is currently leading the market and is poised for continued growth, driven by governments and industries striving to meet renewable energy targets. India, aiming for 450 GW of renewable capacity by 2030, is expected to be a key driver of market growth in the region. Notably, the International Energy Agency predicts that solar power in India will surpass coal’s share in the country’s power-generating mix within the next 20 years.
Economic Benefits Driving the Growth in the Solar Industry
Abigail Ross Hopper, President of the Solar Energy Industries Association, expressed her excitement about the growth prospects of the solar industry. According to her projections, the industry is expected to grow by 52% in the near future, doubling its size. This growth is driven by increasing demand for low-energy prices, particularly in states like Texas and Florida, which are not typically known for their environmental politics but are eager to reduce their energy costs. Hopper emphasized that the solar industry’s growth is not limited to California, which currently has the most solar installations in the country, but is also gaining traction in other states.
Hopper acknowledged the backlash against Environmental, Social, and Governance (ESG) initiatives, including the green transition, but emphasized that the focus on solar energy is driven by its economic benefits, particularly lower prices. She noted that customers, including utilities, corporations, and homeowners, are increasingly turning to solar energy as a way to reduce their energy costs.
As the world continues to transition towards a more sustainable and renewable energy future, the solar energy market is poised for rapid growth and expansion. With that in context, let’s take a look at the 7 most undervalued solar stocks to buy, according to analysts.
A residential home with solar panels installed on its roof, showing the company’s commitment to renewable energy.
Our Methodology
To compile our list of the 7 most undervalued solar stocks to buy according to analysts, we used the Finviz and Yahoo stock screeners to find solar companies cheaper than the S&P 500 Index as of October 4 (forward P/E of 23 as per WSJ). We then narrowed our choices to 7 stocks according to analyst upside potential. We also included 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 their upside potential as of October 4.
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 Most Undervalued Solar Stocks To Buy According To Analysts
7. JinkoSolar (NYSE:JKS)
Upside Potential as of October 4: 10.06%
Number of Hedge Fund Investors: 7
Forward P/E Ratio as of October 4: 11.37
JinkoSolar (NYSE:JKS) is one of the biggest solar companies in the world by revenue. The company primarily focused on developing and producing photovoltaic solar products.
By the end of the second quarter, JinkoSolar’s (NYSE:JKS) achieved new records in cell efficiency, with its N-type TOPCon-based solar cell reaching a lab which reached an efficiency of 33%, surpassing last year’s record of 32.33%. Management believes that the company’s TOPCon technology will offer the best economic performance at a lower cost.
JinkoSolar (NYSE:JKS) is expanding its global presence and plans to establish a 10 GW solar cell and module factory in Saudi Arabia, in partnership with Renewable Energy Localization Company, a wholly-owned subsidiary of the Public Investment Fund (PIF) and Vision Industries, with an investment of $1 billion. This expansion will further solidify JinkoSolar’s (NYSE:JKS) position in the global solar market.
JinkoSolar (NYSE:JKS) is currently trading at an attractive valuation, with a price-to-earnings ratio of 11.37, representing a 51.97% discount compared to the sector median of 23.68. The company’s stock is owned by 7 hedge funds, with a total value of $15.40 million as of the second quarter.
6. First Solar (NASDAQ:FSLR)
Upside Potential as of October 4: 22.16%
Number of Hedge Fund Investors: 66
Forward P/E Ratio as of October 4: 17.42
First Solar (NASDAQ:FSLR) is a leading manufacturer of thin-film photovoltaic solar panels, catering to large-scale solar power projects worldwide with manufacturing facilities in Vietnam and Malaysia.
In Q2, First Solar’s (NASDAQ:FSLR) revenue saw a significant 24.7% increase to $1.01 billion, with EBITDA surging 95% year-over-year to $470 million, driven by higher selling prices and an improved gross margin of 49.4%. The company’s robust order book, extending through 2030, is fueled by strong demand for its products.
First Solar (NASDAQ:FSLR) is currently in the process of patenting its innovative TOPCon technology, which enhances the efficiency of its solar panels. A successful patent could unlock a new revenue stream through royalties, bolstering the company’s financial position and providing a potential long-term growth catalyst. Additionally, the company has completed an upgrade at its Ohio facility and is building new sites in Louisiana and Alabama, which will nearly double its production capacity and enable it to better meet the growing demand for solar energy.
First Solar (NASDAQ:FSLR) has an attractive valuation, with a price-to-earnings ratio of 17.42, which is 26.47% below the sector median of 23.68. Analysts forecast the company’s earnings to grow by 54.78% this year. First Solar’s (NASDAQ:FSLR) stock is owned by 66 hedge funds, with a total value of $1.68 billion as of the second quarter.
5. Canadian Solar (NASDAQ:CSIQ)
Upside Potential as of October 4: 29.26%
Number of Hedge Fund Investors: 10
Forward P/E Ratio as of October 4: 21.40
Canadian Solar (NASDAQ:CSIQ) is a leading global solar technology and renewable energy company. The company designs, manufactures, and sells solar photovoltaic modules and offers solar energy and battery storage solutions. Canadian Solar (NASDAQ:CSIQ) operates two primary business segments: CSI Solar, focused on manufacturing solar products, and Recurrent Energy, a developer of solar and storage solutions. Canadian Solar (NASDAQ:CSIQ) has a strong presence in North America, Europe, and Asia.
The global battery energy storage market is expected to experience significant growth, with a projected value of $25.6 billion by 2029, up from $7.8 billion in 2024, at a CAGR of 26.9%, according to a report by Markets and Markets. Canadian Solar (NASDAQ:CSIQ) has made significant advancements in the energy storage sector, offering integrated storage solutions that combine its solar modules with battery storage technologies, enabling more efficient energy use.
Canadian Solar’s (NASDAQ:CSIQ) energy storage segment has seen impressive growth, driven by rising demand for energy storage solutions worldwide. The company’s energy storage business has developed a strong pipeline of projects globally, with several key installations already operational and more in the pipeline. As of Q2, Canadian Solar (NASDAQ:CSIQ) has a contracted pipeline of over 31 GWh for storage projects.
Canadian Solar (NASDAQ:CSIQ) is trading at a 9.66% discount to its sector median of 23.68, with a forward P/E multiple of 21.40. The company’s stock is owned by 10 hedge funds, with a total value of $48.12 million as of the second quarter. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $20.33 that suggests an almost 30% upside potential from its current levels.
4. Shoals Technologies (NASDAQ:SHLS)
Upside Potential as of October 4: 31.33%
Number of Hedge Fund Investors: 33
Forward P/E Ratio as of October 4: 13.80
Shoals Technologies (NASDAQ:SHLS) is a leading player in the solar energy and electric vehicle solutions space. The company has a proven track record of deploying its products in over 62 GW of solar systems worldwide. Shoals Technologies (NASDAQ:SHLS) boasts an impressive intellectual property portfolio, with over 66 patents that underscore its commitment to innovation.
Shoals Technologies’ (NASDAQ:SHLS) innovative Big Lead Assembly (BLA) System is a game-changer in solar installation technology, and helps integrate multiple components into a single, streamlined unit. This design reduces installation costs by 43% and material costs by 20%, while also enhancing efficiency and safety. The BLA System has set a new standard for electrical balance of systems (EBOS) solutions.
The company has developed a range of innovative solutions to simplify solar and electric vehicle (EV) installations. Its Interconnect System streamlines the connection of solar panels to the grid and reduces the need for specialized labor while 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) is trading at an attractive price-to-earnings (P/E) ratio of 13.80, representing a 31.33% discount compared to the sector median of 20.09. As of the second quarter, 33 hedge funds hold a stake in the company, with a combined value of $208.17 million.
3. Emeren Group (NYSE:SOL)
Upside Potential as of October 4: 44.35%
Number of Hedge Fund Investors: 6
Forward P/E Ratio as of October 4: 8.37
Emeren (NYSE:SOL) is a clean energy company that specializes in developing solar power and solar storage projects. As an Independent Power Producer (IPP), the company has a diversified portfolio of 245MW of photovoltaic (PV) systems and 15MWh of storage systems.
Emeren (NYSE:SOL) has strategically shifted its focus to the European market, where competition is less intense compared to the United States, particularly in the construction of storage systems. The European market, particularly in countries such as Italy, Poland, Spain, France, Germany, and the UK, offers significant opportunities for growth, and the company has an extensive pipeline of solar and storage projects in Europe, which constitutes the majority of its order backlog. This strategic move is expected to drive the company’s growth and expansion in the region.
Emeren (NYSE:SOL) has been expanding its Engineering, Procurement, and Construction (EPC) services, which account for around 50% of the company’s revenues. The demand for EPC services in the photovoltaic sector has been growing, and the company continues to capitalize on this trend, particularly in Europe. This strategic focus on EPC services is expected to contribute to the company’s revenue growth.
Despite facing challenges related to project delays, Emeren (NYSE:SOL) is well-positioned for growth. The stock’s forward PE of 8.37 represents a 58% discount to its sector to the sector median of 20.09. Analysts expect the company to achieve 100% earnings growth this year and are bullish on the company’s stock price with a consensus Buy rating.
2. Nextracker (NASDAQ:NXT)
Upside Potential as of October 4: 47.91%
Number of Hedge Fund Investors: 39
Forward P/E Ratio as of October 4: 11.66
Nextracker (NASDAQ:NXT) is a prominent player in the solar tracking solutions market, serving both utility-scale and distributed generation projects. Since its IPO in 2023, the company has delivered impressive double-digit returns, driven by its market dominance and the rapid growth of the solar energy industry.
Recently, Nextracker (NASDAQ:NXT) secured a significant contract with ACWA Power and Larsen & Toubro to provide its NX Horizon-XTR all-terrain tracker for the 1.17 GW Al Kahfah solar power project in Saudi Arabia. Nextracker (NASDAQ:NXT) will supply its advanced tracker systems, which are designed to maximize energy output by tracking the sun’s movement. Nextracker (NASDAQ:NXT) is also collaborating with local partners in Saudi Arabia to provide raw materials and manufacturing support for the trackers. This substantial 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.
Nextracker (NASDAQ:NXT) is well-positioned to capitalize on the growing demand for solar tracking solutions. A report by Precedence Research estimates that the global solar tracker market will expand from $7.01 billion in 2024 to $71.81 billion by 2034 at a CAGR of 26.2%.
With a forward price-to-earnings ratio of 11.66, the company’s stock trades at a 41.97% discount compared to the sector average.
1. Array Technologies (NASDAQ:ARRY)
Upside Potential as of October 4: 67.22%
Number of Hedge Fund Investors: 30
Forward P/E Ratio as of October 4: 9.60
Array Technologies (NASDAQ:ARRY) is a leading manufacturer and supplier of single-axis trackers for solar panels, enabling them to track the sun’s movement and optimize energy production and efficiency. By maximizing exposure to sunlight, these trackers play a crucial role in enhancing the performance of solar panels.
In Q1, Array Technologies (NASDAQ:ARRY) introduced the innovative Hail Alert Response system, designed to enhance the resilience and durability of solar trackers. This cutting-edge system leverages advanced weather prediction algorithms to automatically stow solar trackers approximately 30 minutes before a predicted hail event, minimizing potential damage and downtime. The Hail Alert Response system is compatible with the company’s existing product portfolio and requires a SmarTrack Controller to function to provide a proactive approach to protecting solar assets from severe weather conditions.
Array Technologies (NASDAQ:ARRY) has strengthened its presence in the Middle Eastern market through a strategic partnership with Alpuco in Saudi Arabia. This collaboration enables the company to capitalize on domestic incentives and source materials locally. Saudi Arabia has set an ambitious target of 130 GW of renewable energy by 2030, making this partnership a potential driver of Array Technologies (NASDAQ:ARRY) market expansion and order book growth.
Array Technologies (NASDAQ:ARRY) trades at an attractive multiple of 9.60 times its earnings, representing a 52.21% discount to the sector median of 20.09.
While we acknowledge the potential of Array Technologies (NASDAQ:ARRY) 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 ARRY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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