The increased focus on climate change has caused countries worldwide to focus on sustainable energy development. The United States aims to go carbon neutral by 2050. The U.S. Energy Information Administration reported that solar power is expected to account for about half the new energy generating capacity in the U.S. It is expected that new, utility-scale solar power will reach 46 gigawatts in the United States in 2022.
According to the Global Market Report 2022, the solar electricity market is projected to reach $125.57 billion in 2026, growing at a 21.7% CAGR. Rising government investment and rapid advancement in technology, including solar panel research and development, are the main drivers of growth in the solar power market.
Given these factors, Wall Street analysts expect solar stocks Enphase Energy, Inc (ENPH), SolarEdge Technologies, Inc. (SEDG), and Sunrun Inc. (RUN) to rally in the near term.
Enphase Energy, Inc (ENPH)
ENPH is an American energy technology company that designs, develops, manufactures, and sells energy solutions internationally for the solar photovoltaic industry. The Petaluma, Calif., concern offers micro inverter-based solar and AC battery storage systems and sells its solutions to solar distributors, strategic partners, equipment manufacturers, and homeowners.
Last month, ENPH expanded battery storage installations in Massachusetts, Pennsylvania, Washington, Illinois, Colorado, and New York. The expansion of ENPH’s IQ Battery in these states might attract a new customer base, increase ENPH’s market influence, and boost its revenue streams. Earlier this month, the company also expanded its battery storage to Arizona for individual families and for the overall grid.
Last month, ENPH partnered with Semper Solaris, a leading home solar and battery contractor, to deploy Enphase Energy systems powered by IQ Microinverters and IQ Batteries across the state. These ENPH’s battery installations are expected to increase its customer reach and profits for the company.
In its fiscal 2021 third quarter, ended Sept.30, ENPH’s revenue increased 96.9% year-over-year to $351.52 million. Its operating income increased 96.8% year-over-year to $85.93 million. Its net income grew 101.5% from its year-ago value to $84.16 million. The company’s earnings per share increased 100% from its year-ago value to $0.30.
The $399.62 million consensus revenue estimate for its fiscal fourth quarter, ending Dec. 31, 2021, represents 50.9% year-over-year growth from the same period in 2020. The $0.59 consensus EPS estimate for the to-be-reported quarter indicates a 16.4% year-over-year growth from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock declined 32.3% in price to close yesterday’s trading session at $132.91. However, ENPH’s 12-month median price target of $242.59 indicates an 82.5% potential upside. The price targets range from a low of $158.00 to a high of $313.00. Of 17 Wall Street analysts that rated ENPH, 15 rated it Buy, while two rated it Hold.
SolarEdge Technologies, Inc. (SEDG)
SEDG designs, develops, operates, and sells optimized inverter systems for solar photovoltaic (PV) installations worldwide. SEDG is headquartered in Herzliya, Israel. The company’s portfolio of products includes SolarEdge Inverter, SolarEdge Power Optimizer, SolarEdge Solutions, and SolarEdge Monitoring Software.
Last October, SEDG announced the availability of a new SolarEdge Energy Bank battery and new SolarEdge Energy Hub inverters in North America. This SolarEdge full residential solution allows homeowners to effectively manage solar energy production, consumption, and storage. Through this expansion of products, SEDG is expected to extend its customer reach and boost its revenues worldwide.
In its fiscal 2021 third quarter, ended Sept. 30, SEDG’s revenues increased 55.7% year-over-year to $526.40 million. Its gross profit increased 58.2% year-over-year to $179.08 million. The company’s operating income rose 90.3% from the same period last year to $95.24 million. And its net income increased 24.6% from the year-ago value to $82.11 million. The company’s net earnings per share increased 19.8% from its year-ago value to $1.45.
Analysts expect SEDG’s revenue for its fiscal fourth quarter, ended Dec. 2021 to be $551.03 million, representing a 53.9% rise year-over-year. The Street expects the company’s EPS for the fourth quarter to come in at $1.33, representing a 35.3% increase year-over-year. Also, SEDG has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of SEDG have slumped 24.7% in price over the past year. However, based on 14 Wall Street analysts that rated SEDG, nine rated it Buy, while five rated it Hold. The $334.57 12-month median price target indicates a 44.7% potential upside from yesterday’s closing price of $231.20. The price targets range from a low of $270.00 to a high of $441.00.
Sunrun Inc. (RUN)
San Francisco-based RUN is a solar battery storage, and energy services company. It designs, develops, operates, and sells residential solar energy systems, such as panels and racking. It also provides battery storage and solar energy systems to its customers and sells its services to commercial developers through its multi-family and home offerings.
Last month, RUN replaced its $250 million resource lending facility with a larger $425 million facility at enhanced terms and a longer tenor. The new $425 million lending facility will mature in January 2025. The new lending facility is expected to expand its borrowing base to support more efficient inventory financing and continued business growth.
Last December, RUN celebrated the completion of a new solar installation with BRIDGE housing that serves 94 rental homes in Suisun City, Calif. This is expected to increase tenant engagement and boost RUN’s revenue streams.
In its fiscal 2021 third quarter, ended Sept. 30, RUN’s total revenue increased 109.2% year-over-year to $438.77 million. The company’s cash increased 38% over the nine months, ended Sept. 30, 2021, to $717.59 million. RUN’s total assets grew 11.9% over the nine-month period to $16.09 billion.
The $410.14 million consensus revenue estimate for its fiscal fourth quarter, ended December 2021 represents a 28% year-over-year. RUN has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
RUN’s shares have declined 68.9% in price over the past year and closed yesterday’s trading session at $23.04. However, Wall Street analysts expect the stock to rebound in the near term. Of the 14 Wall Street analysts that rated RUN, 11 rated it Buy, while two rated it Hold and one rated it Sell. The 12-month median price target of $59.15 indicates a 156.7% potential upside. The price targets range from a low of $20.00 to a high of $91.00.
ENPH shares were trading at $138.00 per share on Friday afternoon, up $5.09 (+3.83%). Year-to-date, ENPH has declined -24.57%, versus a -5.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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