The solar sector has acquired significant importance over the past few years as countries worldwide have increasingly emphasized green energy initiatives. Solar accounted for 46% of all new electricity-generating capacity added in the United States last year, marking the third year in a row that solar represented the largest share of new capacity. Although the industry has faced several headwinds due to supply chain issues and cost pressures, its long-term growth prospects look vast. The impact of potential federal clean energy policies under consideration could potentially increase solar deployment by 66% over the next decade.
According to the U.S. Energy Information Administration, 46.1 gigawatts (GW) of new utility-scale electric generating capacity is expected to be added to the U.S. power grid this year, with almost half of the planned additions being solar. Furthermore, U.S. utility-scale solar generating capacity is expected to grow by 21.5 GW in 2022, surpassing last year’s estimated 15.5 GW of solar capacity additions.
Given the industry’s solid growth prospects, Wall Street analysts see a significant upside potential in solar stocks, Sunrun Inc. (RUN), Sunnova Energy International Inc. (NOVA), Shoals Technologies Group, Inc. (SHLS), ReneSola Ltd (SOL), SPI Energy Co., Ltd. (SPI).
Sunrun Inc. (RUN)
San Francisco’s RUN designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. The company markets and sells its products primarily to residential homeowners through various direct-to-consumer approaches.
In January, RUN announced that it had retired its $250 million recourse lending facility and arranged a $425 million facility at enhanced terms and a longer tenor than its prior term extensions. The new facility expands its borrowing base to support more efficient inventory financing and its growth trajectory.
RUN’s total revenue increased 35.8% from the prior-year quarter to $435.23 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its cash and restricted cash balance stood at $850.43 million, up 20.1% year-over-year. The company added 29,870 customers in the quarter, bringing the total to 660,311. And its solar energy capacity installed grew 31% in 2021, which exceeded guidance and marked its highest growth rate in five years at nearly three times the operating scale.
Analysts expect the company’s revenue for its fiscal first quarter, ending March 2022 to come in at $400.74 million, indicating a19.7% year-over-year increase. Furthermore, the consensus EPS estimate for the same quarter indicates 32% year-over-year growth.
RUN’s shares have gained 15.3% in price over the past month to close the last trading session at $28.37.
Among the 17 Wall Street analysts who have rated RUN, 14 rated it Buy, one rated it Hold, and two rated it Sell. The 12-month median price target of $50.13 indicates a 76.7% potential upside. The price targets range from a low of $16.15 to a high of $91.00.
Sunnova Energy International Inc. (NOVA)
NOVA in Houston, Tex., designs, manufactures, and installs residential solar and energy storage systems across the United States. Its services include operations and maintenance, monitoring, repairs and replacements, equipment upgrades, onsite power optimization, and diagnostics. As of Dec. 31, 2021, it served more than 195 million customers with a generation capacity of 1,140 megawatts.
Last month, NOVA launched its standalone Sunnova Repair Services for all homeowners who are not under a solar service warranty. The company’s certified technicians will now be available to troubleshoot, service, and repair solar and battery storage systems even if they were not installed by NOVA, expanding its customer base.
Earlier this month, NOVA announced the expansion of its strategic partnership with Generac Holdings Inc. (GNRC), a leading global manufacturer of energy technology solutions and other power products, to bring increased resiliency to homeowners. Through this expansion, NOVA will add GNRC’S newly updated technology, including energy storage units, standby home generators, and microinverters, to its current suite of offerings, which should also help attract new customers and add to its revenue stream.
NOVA’s revenue increased 71% year-over-year to $65.02 million in its fiscal fourth quarter, ended Dec. 31, 2021. Also, its adjusted EBITDA came in at $17.74 million, reflecting a 77.5% increase from its year-ago value. For its fiscal year, its net cash provided by financing activities improved 23.2% year-over-year to $1.46 billion, while its cash balance increased 15.8% from its year-ago value to $243.10 million.
NOVA’s revenue for its fiscal year ending Dec.31, 2022 is expected to come in at $348.45 million, indicating 44.1% year-over-year growth. The company’s EPS is expected to increase 4% year-over-year in the same period. Also, its surpassed the consensus EPS estimates in three out of the trailing four quarters.
Over the past month, the stock has gained 22.8% in price to close yesterday’s trading session at $22.69.
All 13 Wall Street analysts that rated NOVA have rated it Buy. The 12-month median price target of $39.08 indicates a 72.2% potential upside. The price targets range from a low of $29.00 to a high of $53.00.
Shoals Technologies Group, Inc. (SHLS)
SHLS provides an electrical balance of system (EBOS) solution for solar energy projects in the United States. It also designs, manufactures, and distributes system solutions for two types of wiring architectures–homerun and combine-as-you-go. The Portland, Tenn., company sells its products to engineering, procurement, and construction firms (EPCs) that build solar energy projects.
On March 10, 2022, SHLS opened a new manufacturing facility in Portland to capitalize on the growth opportunities. The new 219,000 square foot facility, which is expected to be operational in the second quarter of this year, should help SHLS achieve higher operational efficiency and boost its manufacturing capacity.
Last month, SHLS unveiled its eMobility Innovation Center at its headquarters in Portland, Tenn. The company expects this facility to scale up its EV charging infrastructure space capabilities and help meet the growing market demand.
For its fiscal fourth quarter, ended Dec. 31, 2021, SHLS’s revenue increased 24% year-over-year to $48.05 million. Its gross profit grew 7.3% from the year-ago value to $15.92 million. Backlog and awarded orders on December 31 nearly doubled year-over-year to a record $299 million.
The Street expects its EPS for its fiscal first quarter, ending March 31, 2022, to improve 34.1% year-over-year to $0.07. The $million 70.44 consensus revenue estimate for the same quarter represents a 54.5% increase from the same period last year. The company topped the consensus EPS estimates in three of the trailing four quarters.
SHLS has gained 24.1% in price over the past month to close the last trading session at $18.21.
Of the seven Wall Street analysts that have rated SHLS, five rated it Buy, and two rated it Hold. The 12-month median price target of $27.00 indicates a 48.3% potential upside. The price targets range from a low of $20.00 to a high of $35.00.
ReneSola Ltd (SOL)
SOL develops, operates, and sells solar power projects in the United States and Europe. The Yaozhuang Town, China-based company operates in three segments: Solar Power Project Development; EPC Services; and Electricity Generation Revenue.
In January, SOL sold 37 MW of solar projects located in Poland to Danish investment firm Obton, a leading international solar investment company. The 37 MW portfolio is in addition to a 38 MW sale to Obton announced last July, for a combined total of 75 MWs. “This transaction further solidifies our leadership position in Poland, which is an especially attractive market for us. We expect Poland to produce profitable growth in the quarters ahead,” said CEO Yumin Liu.
In its fiscal third quarter, ended Sept. 30, 2021, SOL’s net revenues increased 59.4% year-over-year to $15.54 million. Its gross profit grew 3.1% from its year-ago value to $6.09 million. Its cash and cash equivalents and restricted cash stood at $275.84 million, representing 1,582.6% growth year-over-year.
The company’s revenue for its fiscal year ended Dec. 31, 2021 is expected to come in at $81.73 million, indicating 10.6% year-over-year growth. Also, its EPS is expected to increase 172.2% year-over-year to $0.25 for the same period.
The stock has gained marginally over the past month to close the last trading session at $5.71.
The Wall Street analysts that have rated the stock rated it Buy. The 12-month median price target of $11.25 indicates a 97% potential upside. The price targets range from a low of $10.00 to a high of $12.50.
SPI Energy Co., Ltd. (SPI)
Headquartered in Hong Kong, SPI primarily provides photovoltaic (PV) solutions to business, residential, government, and utility customers and investors. The company operates through the solar energy products and services segment and provides services in the U.S., Greece, Italy, Japan, the U.K., and Australia.
This month, the company announced that its subsidiary, SPI Solar Inc., secured 465 acres to develop a utility-scale solar project in Illinois. Earlier this year, SPI Solar Inc. also secured approximately 473 acres across three parcels to develop a utility-scale solar project in Maryland. Also, SPI announced that Solarjuice Technology, the company’s solar manufacturing division, had signed agreements to upgrade its Sacramento, Calif., manufacturing facility with improved technology, to increase its existing solar module manufacturing capacity to 1.1 gigawatts (GW) by the second half of 2022. These capacity expansions should benefit the company given the expanding solar market.
SPI’s revenue increased 41% year-over-year to $79.40 million in the six months ended June 30, 2021. Its gross profit came in at $7.40 million, reflecting a 134% increase from the prior-year value of $3.10 million. The company’s cash and cash equivalents totaled $22.80 million in the period.
SPI has gained 10.7% in price intraday to close the last trading session at $3.10. Wall Street’s 12-month median price target of $7.00 indicates a 125.8% potential upside.
RUN shares were trading at $28.58 per share on Wednesday afternoon, up $0.21 (+0.74%). Year-to-date, RUN has declined -16.68%, versus a -9.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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