Inflation and rising interest rates have been hurting the solar industry in recent months. Here is a collection of stocks to keep an eye on amid waning near-term demand for solar energy.
- SolarEdge expects third quarter (Q3) 2023 revenue to be significantly lower than previously expected due to “substantial unexpected cancellations” in Europe.
- Enphase Energy missed Wall Street estimates for Q3 2023, with US revenue falling 22% year-over-year.
- Sunrun shares slid last week as Muddy Waters Research renewed its short call on the company.
The Weakening Demand Stock
The SolarEdge [SEDG] share price sunk 39.5% in the month to 27 October after the company warned of a slowdown in Europe. “During the second part of the third quarter of 2023, we experienced substantial unexpected cancellations and pushouts of existing backlog from our European distributors,” CEO Zvi Lando said in a press release ahead of the company’s third quarter (Q3) 2023 results, to be released on 1 November. The company attributed the trend to high inventories and slower-than-expected installation. It revised its revenue guidance for the three months to the end of September to $720m–730m, down from $880m–920m.
The Disappointing Earnings Stock
Enphase Energy [ENPH] shares were down 31.1% in the month to 27 Oct after reporting that a “substantial” drop in demand in Europe and the US caused Q3 2023 revenue to fall 13% year-over-year to $551 1m, missing Wall Street estimates. Sales in the US were down 22% year-over-year and 16% against the previous quarter, due in part to high interest rates, as well as the fact that California changed the way homeowners and businesses are compensated for going solar.
LONGi Green Energy Technology
The Hydrogen Push Stock
LONGi Hydrogen, a wholly owned subsidiary of China’s LONGi Green Energy Technology [601012.SS], the world's largest solar panel materials maker, has signed a deal to supply China Three Gorges Corporation with four electrolysers capable of producing 1,000 cu metres of hydrogen per hour, according to a statement seen by South China Morning Post. It is the firm’s second major deal in six months as China moves forward with its ambitious green hydrogen plans.
The High-End Solar Market Stock
China’s AIKO Solar [600732.SS] announced in September that it would partner with Libra Energy, Europe’s leading photovoltaic (PV) distributor, to supply the high-end distributed PV market with 650 MW of modules. The company’s CEO, Tiger LU, described it as “an important milestone” in its European expansion, which “opens up a broader space for development for us”. Earlier this year, AIKO announced that it would partner with Burgenland Energie to promote the deployment of solar across Europe, including the construction of an innovation centre in Burgenland, Austria.
The Short-Seller Report Stock
Sunrun [RUN] shares fell 10.3% in the week ending 27 October after Muddy Waters Research renewed its short position on the company. “We weren’t cynical enough when we first published our initial short thesis on Sunrun in July 2022,” declared the short seller in a report published last week. It argued that subscriber numbers have been “greatly exaggerated”. Sunrun issued a rebuttal in which it argued that the report was “deceptive”, and that Muddy Waters had got its facts wrong. “Sunrun fully stands behind its reporting of metrics, including subscribers,” it said.
Another Way to Invest in Solar
Global X Solar ETF
Global X Solar ETF [RAYS] holds all five stocks. As of 30 September, IT accounted for 59% of the portfolio, followed by industrials (28.3%), utilities (8.3%), materials (3.2%) and consumer discretionary (1.2%). The fund was down 44.4% in the year to 27 October and down 40.9% in the past six months.
Invesco Solar ETF [TAN] holds SolarEdge, Enphase Energy and Sunrun. As of 27 October, IT accounted for 56% of the portfolio, while utilities and industrials had weightings of 21.6% and 16.1%, respectively. Financials and materials comprised 3.4% and 2.6%, respectively. The fund was down 42.2% in the twelve months to 27 October and down 47.7% in the past six months.
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