As we approach the November 2024 elections, Vice President Kamala Harris's strong debate performance against former POTUS Donald Trump has reignited interest in clean energy stocks. Following the debate, the Invesco Solar ETF (TAN), a popular exchange-traded fund (ETF) tracking the solar industry, jumped more than 6% on Sept. 11.
And beyond potential short-term election catalysts for opportunistic traders, these names could offer longer-term upside for investors, too. Analysts expect the clean energy transition to continue regardless of the election outcome, thanks to surging artificial intelligence (AI)-fueled energy demand and tax incentives that are set in place for years to come - not to mention Trump making a point to say, “I'm a big fan of solar” during his debate with Harris.
UBS has identified a list of stocks — including solar names Sunrun (RUN) and First Solar (FSLR), along with renewable energy and electrification pick Quanta Services (PWR) — as potential winners in an election scenario where Harris wins the top of the ticket and the GOP takes the House. All three stocks have already notched gains since the debate, with upside further juiced by the Fed's jumbo rate cut this week.
Here's a closer look at what these stocks have to offer for investors looking to add some clean energy exposure.
Sunrun Inc.
At $4.5 billion, San Francisco-based Sunrun Inc. (RUN) is a big name in the U.S. residential solar energy market, providing direct-to-consumer solar panel, battery storage, and EV charging solutions.
RUN stock is up more than 35% over the past year, but is nearly flat on a year to date basis. More recently, the stock has surged 54% in the past three months alone.
With a current price-to-sales ratio of 2.15, Sunrun isn't exactly cheap, but it's currently priced at a discount to its own average historical valuations - by about 48%, in fact.
Financially, Sunrun faced some challenges in the second quarter of 2024, with revenue down 11% to $523.9 million compared to last year. However, the company generated $217 million in cash, and expects to generate $350 million to $600 million for the year.
They've also hit a significant milestone, becoming the first clean energy company to surpass 1 million residential solar customers, solidifying its leadership in the market. The company also focuses on storage, installing 265 megawatt hours of storage capacity in Q2 2024, a 152% increase from the previous year.
Sunrun has partnered with both Vistra (VST) and Tesla (TSLA) to enhance Texas grid reliability through battery aggregation programs. With Vistra, Sunrun's Battery Rewards program will work with TXU Energy to aggregate residential solar battery power, providing financial incentives to participants. Separately, Sunrun and Tesla will use Tesla Electric to dispatch stored solar energy during high demand, offering participants $400 annually and generating revenue for Sunrun.
Looking ahead, RUN isn't expected to achieve consistent profitability on an annual basis until the end of the decade, so it's still a speculative play. Analysts have rated the stock a "Moderate Buy," with the mean target price of $22.19 suggesting a 14% upside potential.
Quanta Services, Inc.
Quanta Services, Inc. (PWR) is a leading player in providing specialized contracting services for utilities, renewable energy, and communications. It's a play on rising AI energy demand, as well as renewables.
PWR stock has gained 33.3% this year, and is fresh off new highs of $289.17 today.
Quanta reported mixed results for Q2 of 2024, as non-GAAP EPS of $1.90 missed analysts' expectations by $0.25, while revenue of $5.59 billion surpassed estimates by about $80 million. Analysts are targeting steady EPS growth of roughly 20% for this fiscal year and the next.
PWR stock is trading at a forward P/E ratio of 31.49, suggesting the stock is priced at a premium. With Quanta forecast to achieve double-digit earnings and revenue growth each year through the end of the decade, the margin of error for the company is relatively slim.
That said, the company's recent purchase of Cupertino Electric, Inc., is also set to boost PWR's footprint in the booming data center market, particularly in the tech space, given Cupertino's San Jose stomping grounds. That's an area of the market that's expected to thrive as well under a potential Harris administration.
Analysts are very positive about Quanta, with a "Strong Buy" consensus rating. Among 15 analysts, 12 suggest a “strong buy,” and 3 recommend a “hold.” The mean target price is $289.08, nearly flat with current prices.
First Solar, Inc.
Worth $25.8 billion, Tempe-based First Solar, Inc. (FSLR) is a major player in the solar panel market and, as an industry bellwether, a key "Harris Stock" for speculators to watch pre-election. As one of the biggest solar companies worldwide, the company is known for its thin-film technology and its integrated manufacturing model.
FSLR stock has jumped more than 41% on a year to date basis, though it's down about 20% from its June highs.
While FSLR surged post-debate earlier this month, policies like the Biden administration's Inflation Reduction Act have positioned First Solar to benefit no matter who wins this November, as they expect $1.0 billion to $1.05 billion in tax credits this year.
First Solar has achieved a significant milestone by commissioning the largest solar manufacturing facility in the Western Hemisphere. This new facility, located in Ohio, is expected to enhance the company's production capabilities and meet the growing demand for solar technology by focusing on advancing photovoltaic (PV) technology and improving solar module efficiency.
Financially, First Solar is doing well. Their Q2 2024 earnings report beat expectations, with earnings per share of $3.25 representing a huge 104.4% jump from last year. Net sales also grew to $1.01 billion, a 24.6% increase from the previous year, surpassing analysts' predictions.
For fiscal year 2024, management is projecting earnings between $13.00 and $14.00 per share and sales of $4.4 billion to $4.6 billion. Analysts are optimistic, forecasting 75% EPS growth this fiscal year and 55% growth in fiscal 2025.
At current levels, First Solar looks appealing. Its forward P/E ratio is 17.91, which suggests the stock trades at a discount to its sector peers and its own historical valuations.
The stock has also earned a "strong buy" consensus rating from analysts. The average target price for FSLR is $291.44, indicating a potential upside of 20.2%. Out of 31 analysts in coverage, 22 suggest a “strong buy,” 1 recommends a “moderate buy,” and 8 say to “hold” the stock.
Conclusion
In summary, as the November elections approach, Sunrun, Quanta Services, and First Solar are three "Harris stocks" that investors should keep an eye on. Each company could offer short-term opportunities for traders as the election odds shift in real time - but over the longer term, all three names stand to benefit from secular trends like rising energy demand, electrification, and the clean energy transition. For investors looking to add energy exposure beyond oil and gas, these three top picks look well-positioned to add some long-term green to any portfolio.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
