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Solar Shines: 3 Bullish Catalysts Suggest Further Upside
Solar Stocks Shine: Is the Rally for Real?
Slowing demand, a "hawkish" Federal Reserve, and Chinese competition have been bearish catalysts for the solar industry. Over the past year, the Invesco Solar ETF, a proxy for the solar industry, is down more than 30%. However, last week, TAN bullishly reclaimed its 200-day moving average (a long-term trend filter) for the first time in more than a year.
Though solar stocks were beaten down before the recent rally, the fundamentals and bullish catalysts surrounding the industry suggest that this is more than just a "dead cat bounce." Below are three reasons to be bullish on the solar industry over the next 2-3 years:
Data Centers + Clean Energy
Artificial Intelligence (AI) and Large Language Models (LLMs) like OpenAI and Microsoft's ChatGPT, etc. require large data centers to "train" these models. Unfortunately, data centers require vast amounts of power consumption. As tech giants race for AI supremacy, Newmark predicts that U.S. data center power consumption will double by 2030.
While power needs will increase dramatically, world governments and many citizens remain concerned about climate change and want to focus on a clean energy future. Higher, clean energy needs leave only two games in town – nuclear and solar. Though nuclear is a potential solution for the vast energy needs, solar is far easier to implement on a wide scale.
Leading solar manufacturer First Solar is up more than 50% this month after a Goldman report says it sees upside in the stock as "demand strengthens on data center surge." Meanwhile, companies like Nextracker, which makes solar projects more energy efficient, are rallying in sympathy.
Biden Administration Cracks Down on China
The Biden Administration is taking action to bolster the domestic solar industry. According to the White House website; "The tariff rate on solar cells (whether or not assembled into modules) will increase from 25% to 50% in 2024. The tariff increase will protect against China's policy-driven overcapacity that depresses prices and inhibits the development of solar capacity outside of China."
The Biden administration's crackdown on low-cost Chinese solar providers is a significant bull catalyst for U.S. solar manufacturers.
Interest Rate Cuts
Higher interest rates have been bearish for the solar industry because higher borrowing costs have made it more expensive for companies to finance solar projects. However, with the market now pricing in multiple rate cuts for 2024, its hard not to be bullish on solar names such as Enphase Energy.
Bottom Line
Solar stocks have rallied recently, but the rally is more than just a "dead cat" bounce. Data center demand, a crackdown on Chinese solar, and interest rate cuts all bode well for solar in 2024.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: TAN, Microsoft's, First Solar, Nextracker and Enphase Energy
For Immediate Release
Chicago, IL – May 29, 2024 – Today, Zacks Investment Ideas feature highlights Invesco Solar ETF (TAN - Free Report) , Microsoft's (MSFT - Free Report) , First Solar (FSLR - Free Report) , Nextracker (NXT - Free Report) and Enphase Energy (ENPH - Free Report) .
Solar Shines: 3 Bullish Catalysts Suggest Further Upside
Solar Stocks Shine: Is the Rally for Real?
Slowing demand, a "hawkish" Federal Reserve, and Chinese competition have been bearish catalysts for the solar industry. Over the past year, the Invesco Solar ETF, a proxy for the solar industry, is down more than 30%. However, last week, TAN bullishly reclaimed its 200-day moving average (a long-term trend filter) for the first time in more than a year.
Though solar stocks were beaten down before the recent rally, the fundamentals and bullish catalysts surrounding the industry suggest that this is more than just a "dead cat bounce." Below are three reasons to be bullish on the solar industry over the next 2-3 years:
Data Centers + Clean Energy
Artificial Intelligence (AI) and Large Language Models (LLMs) like OpenAI and Microsoft's ChatGPT, etc. require large data centers to "train" these models. Unfortunately, data centers require vast amounts of power consumption. As tech giants race for AI supremacy, Newmark predicts that U.S. data center power consumption will double by 2030.
While power needs will increase dramatically, world governments and many citizens remain concerned about climate change and want to focus on a clean energy future. Higher, clean energy needs leave only two games in town – nuclear and solar. Though nuclear is a potential solution for the vast energy needs, solar is far easier to implement on a wide scale.
Leading solar manufacturer First Solar is up more than 50% this month after a Goldman report says it sees upside in the stock as "demand strengthens on data center surge." Meanwhile, companies like Nextracker, which makes solar projects more energy efficient, are rallying in sympathy.
Biden Administration Cracks Down on China
The Biden Administration is taking action to bolster the domestic solar industry. According to the White House website; "The tariff rate on solar cells (whether or not assembled into modules) will increase from 25% to 50% in 2024. The tariff increase will protect against China's policy-driven overcapacity that depresses prices and inhibits the development of solar capacity outside of China."
The Biden administration's crackdown on low-cost Chinese solar providers is a significant bull catalyst for U.S. solar manufacturers.
Interest Rate Cuts
Higher interest rates have been bearish for the solar industry because higher borrowing costs have made it more expensive for companies to finance solar projects. However, with the market now pricing in multiple rate cuts for 2024, its hard not to be bullish on solar names such as Enphase Energy.
Bottom Line
Solar stocks have rallied recently, but the rally is more than just a "dead cat" bounce. Data center demand, a crackdown on Chinese solar, and interest rate cuts all bode well for solar in 2024.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.