The renewable energy industry has been surging since the second half of 2020 on investor optimism surrounding policy support from governments around the world to achieve net-zero carbon emissions. Because solar is one of the most popular renewable energy sources, shares of companies in the sector have been surging over the past year. Furthermore, President Biden’s interest in the electrification of vehicles over the next few years is motivating various solar companies to find efficient ways to charge electric vehicles with solar power.
Given the current industry tailwinds, Wall Street is placing huge bets on the solar industry. This has driven a rally in solar stocks, as evidenced by Invesco Solar Portfolio ETF’s (TAN) 210.4% returns over the past year versus S&P 500’s 50% gains.
Based on consensus price targets, we think prominent solar stocks Enphase Energy, Inc. (ENPH), SolarEdge Technologies, Inc. (SEDG), and ReneSola Ltd. (SOL) have the potential to rally by more than 20% in the next 12 months.
Enphase Energy, Inc. (ENPH)
ENPH is a provider of energy management solutions for the solar photovoltaic industry in the United States and internationally. The company manufactures and sells semiconductor-based microinverters that convert energy at the individual solar module level, combined with its proprietary networking and software technologies to provide energy monitoring and control services. ENPH sells its solutions to solar distributors, original equipment manufacturers, strategic partners, and homeowners, as well as to the do-it-yourself market through its product upgrade program or online store.
ENPH expanded its Enphase Installer Network (EIN) into the Netherlands and Belgium this month. It hopes to expand its reach to more European countries in 2021. On April 1, ENPH completed the acquisition of the Solar Design Services business of DIN Engineering Services LLP, an India-based company that provides outsourced proposal drawings and permit plan sets for residential solar installers in North America. And last month, Rubicon Energy agreed to distribute Enphase IQ microinverters for grid-tied photovoltaic (PV) applications to residential and commercial installers in the fast-growing South African market.
For the fourth quarter, ended December 31, 2020, the company’s net revenues increased 26.1% year-over-year to $264.84 million. Its non-GAAP gross profit was $106.55 million, which represents a 35.9% improvement year-over-year. Its income from operations was $72.36 million for the fourth quarter, which represented a 38.4% year-over-year rise. ENPH’s non-GAAP net income came in at $71.34 million, up 37.1% year-over-year. And its non-GAAP EPS showed a 30.8% improvement from the prior-year period to $0.51.
Analysts expect SKYW’s EPS to improve 188.2% year-over-year for the current quarter, ending June 30, 2021, to $0.49. It has surpassed the Street’s consensus EPS estimates in each of the trailing four quarters. And its consensus revenue estimate of $319.94 million for the current quarter represents a 154.9% rise on a year-over-year basis.
The stock has gained 305.2% over the past year and 192.6% over the past nine months. ENPH closed yesterday’s trading session at $153.09.
Of 13 Wall Street analysts that have rated the stock, 9 rated it Buy and 4 rated it Hold. They expect the stock to hit $217.82 in the near term, which indicates a potential upside of 42.3%.
SolarEdge Technologies, Inc. (SEDG)
SEDG offers direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations worldwide. The company’s product lineup consists of inverters, power optimizers, communication devices, and smart energy management solutions used in residential, commercial, and small utility-scale solar installations. It also offers a cloud-based monitoring platform that collects and processes information from the power optimizers and inverters, as well as monitors and manages the solar PV system. In addition, it offers pre-sales support, ongoing training, and technical support and after installation services.
In February, Sunrun Inc. (RUN), a leading U.S. provider of residential solar, battery storage, and energy services, agreed to supply SEDG’s next generation PV SolarEdge Energy Hub inverter to residential customers. Also in February, SEDG’s SolarEdge e-Mobility division was selected to supply full electrical powertrain units and batteries to produce the Fiat E-Ducato light commercial vehicle.
SEDG’s revenues were $358.11 million for the fourth quarter, ended December 31, 2020, which represents an improvement of 5.9% sequentially. Its gross profit was $116.42 million, up 2.8% from the third quarter of 2020. The company’s total assets have increased 63.1% year-over-year to $2.44 billion as of December 31, 2020. Its cash and cash equivalents came in at $827.15 million for the year, up 269.4% from the prior year.
A consensus EPS estimate of $1.16 for the current quarter, ending June 30, 2021, represents a 19.6% rise year-over-year. The stock has surpassed the consensus EPS estimates in three of trailing four quarters. Also, its consensus revenue estimate of $1.85 billion for its fiscal year 2021 represents a 27% rise from the prior-year period.
The stock has rallied 192.2% over the past year and 74.2% over the past nine months and ended yesterday’s trading session at $269.44.
Wall Street analysts expect the stock to hit $327.85 in the near term, which indicates a potential upside of 21.7%. Of 16 Wall Street analysts, 7 have rated it Buy and 7 rated it Hold.
ReneSola Ltd. (SOL)
SOL focuses on solar power project development, construction management and project financing services. The company operates through two segments—Project Development and IPP Business. It develops and sells solar power projects (project development business), and sells the electricity generated by its operated solar power plants (IPP business). SOL’s project development business is focused on small-scale distributed generation (DG) projects and community solar gardens in the United States, Poland, Hungary, Spain, France and the United Kingdom.
Last week, SOL closed the sale of an approximately 10 MW portfolio of solar development projects to Greenbacker Renewable Energy Company. In January, it closed an offering of 10 million American Depositary Shares (ADSs), realizing gross proceeds of $250 million. Also, SOL has signed a Memorandum of Understanding (MOU) with Eiffel Investment Group to establish a joint venture that will provide financing for SOL’s current and future solar projects across Europe.
The company’s non-GAAP net revenue has increased 66.7% sequentially to $16.97 million for the fourth quarter, ended December 31, 2020. The company had cash and cash equivalents of $40.68 million as of December 31, 2020, which represents an improvement of 64.7% year-over-year. SOL’s total assets increased 5.4% year-over-year to $337.35 million.
Analysts expect SOL’s EPS for the next quarter, ending September 30, 2021, to be $0.06, up 20% year-over-year. Also, for the next quarter, analysts expect SOL’s revenue to be $27.18 million, representing a 178.8% rise from the prior-year period. The stock’s EPS is expected to grow at 15% per annum over the next five years.
The stock has gained 856.2% over the past year and 716.3% over the past nine months to close yesterday’s trading session at $10.04. It has gained 1003.3% since hitting its 52-week low of $10.04.
Wall Street analysts expect the stock to hit $14.75 in the near term, which indicates a potential upside of 46.9%. Also, all two Wall Street analysts covering the stock have rated it Buy.
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ENPH shares were trading at $152.21 per share on Wednesday afternoon, down $0.88 (-0.57%). Year-to-date, ENPH has declined -13.26%, versus a 10.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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