The U.S. solar energy market continues to struggle with the pandemic-induced supply chain challenges and shipping constraints, which have led to an increase in prices. Price increases have impacted deployment, with 2022 installation forecasts dropping from 30 GW to 15 GW over the last year. Moreover, U.S. solar soft costs remained high.

In the second quarter of 2022, the U.S. solar industry installed 4.6 GW DC of solar capacity, a 12% decrease from the same period in 2021. Utility-scale solar installations decreased 25% from the same quarter last year. Similarly, commercial solar installations were down 7% year-over-year.

Although the recent Inflation Reduction Act (IRA) is anticipated to boost the solar industry, Wood Mackenzie, a research and consultancy company, expects the solar industry to remain supply-constrained through the end of 2023.

Given this backdrop, fundamentally weak solar stocks, Sunrun Inc. (RUN) and Array Technologies, Inc. (ARRY), might be best avoided.

Sunrun Inc. (RUN)

RUN engages in the design, installation, sale, ownership, and maintenance of residential solar energy systems in the United States. The company also sells solar energy systems and products, such as panels and racking, and solar leads generated to customers.

On August 3, RUN announced the launch of its new Level 2 electric vehicle (EV) charger. This is expected to cater to the growing demand for EVs. However, with nationwide rolling expected to begin by year-end as an optional add-on, there might still be some time before significant gains might be realized from this product.

For the fiscal second quarter ended June 30, 2022, RUN’s total operating expenses increased 36.3% year-over-year to $739.89 million. Its loss from operations increased 9.5% year-over-year to $155.31 million. The company’s net loss increased 1.7% from its year-ago value to $209.76 million. Its loss per share decreased 70% year-over-year to $0.06.

The consensus EPS estimate of a negative $0.69 for the fiscal year ending December 2022 indicates a decline of 194% year-over-year. The consensus revenue is expected to be $2.16 billion for the same year.

The stock has declined 12.8% over the past year and 2.8% over the past five days to close its last trading session at $37.36.

RUN’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

RUN has an F grade for Value, Stability, and Quality and a D for Growth and Sentiment. It is ranked #18 of 20 stocks in the F-rated Solar industry.

Beyond what we’ve stated above, we have also given RUN a grade for Momentum. Get all RUN ratings here.

Array Technologies, Inc. (ARRY)

ARRY manufactures and supplies solar tracking systems and related products internationally. Its products include DuraTrack HZ v3, a single-axis solar tracking system, and SmarTrack, a real-time software used to identify the optimal position for a solar array.

ARRY’s total operating expenses came in at $54.22 million for the second quarter that ended June 30, 2022, up 157.2% year-over-year. Its loss from operation increased 1,092.3% year-over-year to $6.84 million. Its net loss to common shareholders grew 171.1% from its year-ago value to $14.96 million, while its loss per share rose 150% year-over-year to $0.10.

ARRY’s consensus EPS is estimated to be 0.10 in the third fiscal quarter ending September. Its consensus revenue is estimated to be $396.69 million for the same quarter.

Over the past month, the stock has declined 21.4% to close the last trading session at $18.01. It has declined 9.5% intraday.

ARRY’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.

The stock has an F grade for Stability and a D for Value, Sentiment, and Quality. ARRY is ranked #13 in the same industry. Click here to access the additional POWR Ratings for ARRY (Growth and Momentum).

RUN shares were trading at $37.04 per share on Friday afternoon, down $0.32 (-0.86%). Year-to-date, RUN has gained 7.99%, versus a -18.28% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

More...