The solar sector has been blazing hot over the final three quarters of 2020. In fact, some of these stocks are just heating up as we head into the new year.

The solar industry builds devices that capture the energy from the sun and convert it into power. The industry has grown rapidly as more people become concerned over climate change. Solar stocks should receive an additional boost should President-elect Biden fulfill his promise of re-entering the Paris Climate Change Accord.

Let’s take a quick look at four of the top solar stocks with bullish outlooks for the year ahead: Enphase Energy (ENPH), Canadian Solar (CSIQ), SunPower Corporation (SPWR), and Azure Power (AZRE).

Enphase Energy (ENPH)

ENPH is not a traditional solar company in that it does not make or sell solar panels. Rather, ENPH makes inverter technology used by solar industry power players. This technology enhances energy production while simplifying design and boosting system reliability. ENPH’s technology also improves system uptime and decreases the risk of fire.

ENPH has an “A” grade in the Trade Grade component of the POWR Ratings. The stock also has “B” grades in the Peer Grade and Buy & Hold Grade components. Out of 19 stocks in the Solar industry, ENPH is ranked first.

There have been some rumors swirling that ENPH might be acquired. In the meantime, the stock has been on a roll following the news that the company struck an agreement with MSpectrum to install microinverters in solar panels at both residential and commercial buildings. Furthermore, Barclays has raised ENPH’s price target.

Canadian Solar (CSIQ)

CSIQ is a maker of solar technology components ranging from wafers to modules/panels, cells, ingots, and more. The POWR Ratings reveal CSIQ has an “A” grade in the Trade Grade component, along with a “B” grade in the Buy & Hold Grade component. CSIQ is ranked 5th out of nearly 20 stocks in the Solar industry.

Analysts have set an average price target of $45.71 for the stock, indicating a potential 17% upside. Though CSIQ has been on a tear this year, the stock has a fairly low forward P/E ratio of 24.22. CSIQ has the potential to continue its ascent simply because the company is diversifying its solar products as time progresses. This innovator continues to develop solar energy storage solutions that enhance energy delivery and solar efficiency.

The company has a compound annual growth rate of 18%. This is quite the accomplishment considering one of CSIQ’s top competitors, First Solar, has a compound annual growth rate of a mere 4%.

SunPower Corporation (SPWR)

A growing number of solar electric systems installed at homes and power plants are made by SPWR. This company’s high-performance solar systems are selling like hotcakes, helping SPWR decrease its short-term debt risk. The sales spike, combined with a debt reduction and investors’ growing admiration for renewable energy stocks, has helped SPWR’s stock climb from under $10 to more than $20 in less than a year.

It is particularly interesting to note SPWR spun off its manufacturing segment, ultimately setting the stage for long-term growth. The POWR Ratings reveal SPWR has an “A” grade in the Trade Grade component along with “B” grades in the Peer Grade and Buy & Hold Grade components. SPWR is ranked in the top five out of 19 publicly traded companies in the Solar industry.

Azure Power (AZRE)

If you are looking for a solar business that develops and produces its own solar energy, look no further than AZRE. AZRE designs and builds solar installations integrated into grids and off-grid solar installations for remote areas. 

While many other solar power providers have neglected rural areas, AZRE has seized the opportunity to serve these homeowners and businesses in remote areas, recognizing that there is big money to be made by extending solar power to those who live work outside of urban and suburban spaces. The company also provides solar installations placed on the roofs of commercial buildings and homes.

The POWR Ratings show AZRE has an “A” grade in the Trade Grade and Peer Grade components. The stock also has a “B” grade in the Buy & Hold Grade component. AZRE is ranked 6th in the Solar industry. Out of five analysts who cover AZRE, four rate it as a “Buy,” and only one recommends holding.

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ENPH shares were trading at $130.35 per share on Thursday morning, up $3.09 (+2.43%). Year-to-date, ENPH has gained 398.85%, versus a 15.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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