The acceleration in solar energy adoption over the past few years can be attributed to global efforts to reduce greenhouse gas emissions and curtail the effects of climate change. In 2012, the International Energy Agency (IEA) predicted that global solar energy generation would reach 550 terawatt-hours by 2030. However, that target was surpassed in 2018.
In December, the U.S. approved two large-scale solar projects in California and the opening up of public lands in other Western states for additional solar power development. The approvals signify a step toward in the Biden administration’s efforts to limit climate change and meet sustainability targets.
The global solar electricity market is expected to grow to $57.25 billion in 2022 from $46.79 billion in 2021,representing a 22.4% CAGR. Given the industry’s growth prospects, Wall Street analysts expect solar stocks Enphase Energy, Inc. (ENPH), SolarEdge Technologies, Inc. (SEDG), and Sunrun Inc. (RUN) to rebound this year.
Enphase Energy, Inc. (ENPH)
ENPH in Petaluma, Calif., designs, develops, manufactures, and sells home energy solutions for the photovoltaic industry. The company’s offerings include semiconductor-based microinverters that convert energy at the individual solar module level and AC battery storage systems.
On Jan. 3, ENPH announced that it had completed the acquisition of electric vehicle (EV) charging manufacturer ClipperCreek. The acquisition is expected to launch ENPH into the EV sector and accelerate its adoption of bi-directional charging capabilities, among other benefits. Previously (on Dec.21)ENPH had announced the acquisition of predictive software platform 365 Pronto, Inc., which is expected to expand its digital platform.
And on Dec. 27, the company declared the production shipments of IQ8 Microinverters for its North American customers. This should add to the company’s profits by providing customized configurations for flexible solar power needs for customers.
For its fiscal third quarter, ended Sept. 30, ENPH’s net revenues increased 96.9% year-over-year to $351.52 million. Its non-GAAP income from operations rose 96.8% from the prior-year quarter to $85.93 million. Its non-GAAP net income and non-GAAP net income per share improved 101.5% and 100%, respectively, to $84.16 million and $0.60.
The $0.62 consensus EPS estimate for the fourth quarter of 2021 indicates a 21.6% year-over-year increase. And the $396.49 million the consensus revenue estimate for the same quarter reflects a 49.7% improvement from the prior-year quarter. Also, ENPH has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, ENPH’s stock has gained 3.5% in price to close yesterday’s trading session at $178.28. It has gained 22.9% over the past three months.
Of the 16 Wall Street analysts rating ENPH, 14 have rated it Buy, while two have rated it Hold. The $266.13, 12-month median price target indicates a 49.3% potential upside. The price targets range from a low of $180.00 to a high of $313.00.
SolarEdge Technologies, Inc. (SEDG)
SEDG, based in Herzliya, Israel, is a designer and developer of direct current (DC) optimized inverter systems for solar photovoltaic installations worldwide. The company offers inverters, power optimizers, and communication devices.
On Oct. 20, SEDG announced the commercial availability of its SolarEdge Energy Bank residential batteries in North American markets. The company also declared the availability of its new SolarEdge Energy Hub Inverter. This venture should enhance SEDG’s product portfolio.
SEDG’s revenues increased 55.7% year-over-year to $526.40 million in its fiscal third quarter, ended Sept. 30. Its non-GAAP operating income improved 90.3% from the same period last year to $95.24 million. Its non-GAAP net income and non-GAAP EPS came in at $82.11 million and $1.45, respectively, up 24.6% and 19.8% from the prior-year quarter.
Analysts expect SEDG’s EPS to increase 38.8% year-over-year to $1.36 for its fourth fiscal quarter of 2021. And the Street expects its revenue to come in at $552.69 million in the same quarter, indicating a rise of 54.3% from the same period last year. In addition, SEDG has topped consensus EPS estimates in three of the trailing four quarters.
The stock has gained 7% in price over the past three months to close yesterday’s trading session at $273.10.
Of the 19 Wall Street analysts that rated SEDG, 14 have rated it Buy, four have rated it Hold, and one has rated it Sell. The 12-month median price target of $377.59 indicates a 38.3% potential upside. The price targets range from a low of $300.00 to a high of $441.00.
Sunrun Inc. (RUN)
RUN designs, develops, installs, and sells residential solar energy systems in the United States. The San Francisco company supplies solar energy systems and products, such as panels and racking, and offers battery storage.
On Oct. 29, RUN announced the expansion of its program with SPAN, an electrical panel developer. The program is expected to enhance RUN’s customer experience and reduce costs and installation complexities by leveraging SPAN’s home electrical panel with an intuitive app interface.
On Oct 11, RUN announced an increase in its non-recourse warehouse lending facility to $1.8 billion commitments and reduced interest costs. Regarding this, Tom von Reichbauer, Sunrun’s Chief Financial Officer, said, “We are excited to expand our warehouse facility to support continued growth while also lowering the cost of financing.”
For its fiscal third quarter, ended Sept. 30, RUN’s total revenue increased 109.2% year-over-year to $438.77 million. Its net cash provided by financing activities climbed 93.5% from the prior-year quarter to $704.50 million. The company’s cash and restricted cash balance came in at $941.12 million, up 146.7% from the same period last year.
The Street’s $0.03 EPS estimate for the last quarter of 2021 indicates a 104% year-over-year rise. And its $408.92 million revenue estimate for the fourth quarter of 2021 reflects a 27.6% improvement from the prior-year quarter.
RUN’s shares have gained 1.7% in price over the past five days to close yesterday’s trading session at $34.57.
Of the nine analysts rating RUN, five have rated it Buy, two have rated it Hold, and two have rated it Sell. The 12-month median price target of $61.64 indicates a 78.3% potential upside. The price targets range from a low of $20.00 to a high of $91.00.
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ENPH shares fell $3.28 (-1.84%) in premarket trading Wednesday. Year-to-date, ENPH has declined -4.50%, versus a 0.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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