Solar stocks like SunRun, Enphase, SunPower and SolarEdge have benefitted from the US government’s decision to suspend import tariffs on components from Southeast Asia for a year. While all four companies’ share prices are in the red for the year-to-date, analysts are bullish about the industry’s long-term growth prospects.
The US government’s decision on 6 June to suspend import tariffs on solar power equipment caused solar stocks to soar last week. Following the news, SunRun [RUN] closed the day 7% higher, Enphase Energy [ENPH] jumped 6% and SunPower [SPWR] and SolarEdge Technologies [SEDG] rose 4% and 3.5%, respectively.
With traditional energy supplies under pressure due to the war in Ukraine and rising oil and gas prices as a result of sanctions against Russia, President Joe Biden has declared a 24-month tariff exemption for solar panel products and components from a number of Southeast Asian importers.
The US solar industry has effectively gone cold the past couple of months after the Department of Commerce launched a federal investigation into whether China was circumnavigating strict duty rules by bringing them into the US through other countries. Biden has said the investigation can continue but, to unfreeze the industry, his administration would suspend the tariffs for manufacturers in Cambodia, Malaysia, Thailand and Vietnam. The four countries account for roughly 80% of solar panel imports, according to the American Clean Power Association.
“Imported solar panels remain an important component to addressing the immediate demands of bringing additional energy sources online and addressing the energy needs of the American people,” commerce secretary Gina Raimondo said in a statement in response to Biden’s announcement.
Powering the future
SunRun, Enphase, SunPower and SolarEdge have all fallen away since the start of last week amid the continued broader market selloff but are trading higher over the past month on the back of the promising news. At the close on 14 June, Enphase was up 19.5%, SolarEdge had gained 18%, SunPower 14.3% and SunRun 10.7%. It marks a continuation of a yo-yo effect for the industry, which saw stocks gain in the first few weeks of the war in Ukraine before pulling back sharply in May as inflation concerns began to bite. All four are in the red year-to-date through the close on 15 June.
Solar stocks present a long-term investment opportunity, however. The four companies have been making moves to secure their role in powering the future. Disruptions to supply chains and the delivery of projects has led Enphase to turn its attention to Europe. CEO Badri Kothandaraman told Barron’s following its first-quarter earnings in April that he expects the company to grow its sales on the continent in Q2 by 40% sequentially. “The people in Europe are very climate conscious. The Ukraine situation has forced them to be even more energy independent. So, it’s a no-brainer,” Kothandaraman said.
SolarEdge has boosted its own supply chain by opening its new 2 GWh battery cell manufacturing plant in South Korea in late May.
In March, SunPower announced its an expansion of its residential battery storage system, SunVault, to rival Tesla’s [TSLA] Powerwall. The system, which includes 26 kWh and 52 kWh configurations, provides homeowners with backup power in the event of an outage. Installations are expected to start this month. SunRun’s BrightBox is another battery storage alternative.
“As power disruptions are becoming more commonplace, the demand for energy resilience and reliability is higher than ever,” SunPower’s chief products officer, Nate Coleman, said in a press release.
A bright spot
Looking ahead, Morningstar analyst Brett Castell believes the tariff suspension offers “much-needed near-term certainty for developers” that may have delayed projects “as they awaited clarity”.
Castelli also commended Biden for authorising the use of the Defense Production Act (DFA) to boost the domestic clean energy technologies, especially solar panels. The DFA has previously been invoked for Covid-19 vaccines and electric vehicle battery materials.
“We view these actions as aimed at balancing continued buildout of solar projects in the near term to support decarbonization goals, while looking to increase US solar manufacturing over time,” wrote Castell.
Wall Street is overwhelmingly bullish on the sector in general, according to MarketBeat data. SunRun has 13 ratings – all ‘buy’. Enphase has 20 buy ratings and four hold ratings. SolarEdge has 19 ‘buy’, five ‘hold’, and one sell. SunPower has three ‘buy’, seven ‘hold’ and two ‘sell’.
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