As the world’s leading supplier of micro inverter-based solar-plus-storage systems, Enphase Energy, Inc. (ENPH) has benefited handsomely from the growth of the solar energy market. Over the past year, the stock has rallied 497.7% to close yesterday’s trading session at $179.02. However, with a trailing-12-month P/S of 32.41x (versus the industry average of 4.20x), the stock looks overvalued now. The stock has also lost 13.4% since hitting its 52-week high of $222.43 on January 7.
Consequently, we think it wise to target better-performing stocks in the solar space to benefit from the industry’s tailwinds. With a dramatic decline in costs and rapid technological advancements, solar energy is likely to get a boost this year. Moreover, the Biden administration’s clean energy goals are expected to be a major support for the industry’s continued growth. Growing investor interest in the solar energy space is evident from Invesco Solar ETF’s (TAN) 138.6% gains over the past six months.
SunPower Corporation (SPWR)
Headquartered in San Jose, California, SPWR delivers solar power solutions worldwide. The company has been ranked #1 in commercial solar since 2017. SPWR provides solar power components, including panels and system components, primarily to dealers, system integrators, and distributors. The company also offers commercial rooftop and ground-mounted solar power systems and residential mounting systems.
SPWR’s top line climbed 26.3% sequentially to $274.81 million for the third quarter ended September 27, 2020. Its revenue from Solar power systems, components, and other segments, which accounted for 97.4% of total revenue, increased 26% sequentially to $267.62 million, and revenue from solar services increased 50.2%. In the Residential and Light Commercial (RLC) segment, the company added 10,000 customers. Its net income has increased 130.3% sequentially to $44.63 million.
Analysts expect SPWR’s revenue to increase 23% in 2021. The company’s EPS is expected to increase 155.6% for the quarter ending March 31, 2021, and 181% in fiscal 2021. SPWR has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters.
This week SPWR announced plans to significantly expand its SunPower Residential Installation (SPRI) program this year and plans to establish SPRI in in seven new markets across six states by the end of the second quarter. In November, the company announced a tender offer to purchase its outstanding 0.875% convertible senior debentures due this year . Over the past year, the stock has rallied 523.8% to close yesterday’s trading session at $52.34. It is currently trading 4.8% below its 52-week high, which it hit on January 25.
How does SPWR stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Overall POWR Rating
The stock is ranked #1 of 17 stocks in the Solar industry.
Canadian Solar Inc. (CSIQ)
Founded in 2001, CSIQ has grown to be one of the world’s largest solar photovoltaic products and energy solutions providers, as well as one of the largest solar power plant developers globally. With active buyers in more than 150 countries, the company has shipped some 52 GW solar modules. CSIQ operates mainly through two segments — module and system solutions (MSS) and energy.
CSIQ’s solar module shipments exceeded guidance for the third quarter ended September 30, 2020. Its revenue increased 20.3% year-over-year to $914.36 million. Its total module shipments increased 33% year-over-year to 3,169 MW. And its gross profit increased 21.2% sequentially to $178.42 million, yielding a gross margin of 19.5%. Its EPS of $0.15 surpassed the consensus estimate by 400%. As of September 30, 2020, CSIQ’s total project pipeline was 16.3 GWp.
Analysts expect the company’s revenue to increase 8.5% for the quarter ended December 31, 2020, 18.1% for the quarter ending March 2021, and 43.6% in 2021. CSIQ’s EPS is expected to increase 20.4% in 2021, and at a rate of 20% per annum over the next five years. The company has an impressive earnings surprise history; it has beaten consensus EPS estimates in each of the trailing four quarters.
CSIQ announced this month that that its wholly-owned subsidiary, Recurrent Energy, had completed the sale of the Slate project to Goldman Sachs Group, Inc.’s (GS) Goldman Sachs Renewable Power LLC (GSRP). The Slate project is a 300 MWac solar plus 140.25 MW / 561 MWh storage project located in Kings County, California. Also this month, CSIQ’s wholly owned subsidiary, Recurrent Energy, completed the sale of the 144 MWac Pflugerville Solar project to Duke Energy Renewables, which is a subsidiary of Duke Energy Corporation (DUK). The stock has gained 15% so far this year.
CSIQ’s POWR Ratings reflect this promising outlook. It has an overall rating of Strong Buy with an A for Trade Grade and Peer Grade, and a B for Buy & Hold Grade. Among stocks in the Solar industry, it is ranked #2.
ReneSola Ltd. (SOL)
Founded in 2005, SOL manufactures and sells various solar power products. The company operates mainly operates through three segments — Solar Power Project Development, EPC Services, and Electricity Generation Revenue. Also, SOL develops and sells solar power projects (project development business), owns and operates solar power projects, and sells electricity generated by its solar power plants (IPP business).
SOL’s $9.75 million of revenue for the third quarter ended September 30, 2020 was at the high end of its guidance range. The company reported its second consecutive quarter of profitability with non-GAAP net income of $2.5 million, yielding EPS of $0.04. As of November 30, 2020, SOL’s project pipeline had 732 MW late-stage projects, with 300 late-stage projects in the United States and 150 in the United Kingdom, among others.
Analysts expect the company’s revenue to increase 18.1% for the quarter ending March 31, 2021 and 126.7% in 2021. SOL’s EPS is expected to increase 95.7% for the quarter ended December 31, 2020, 3000% in 2021, and at a rate of 15% per annum over the next five years. The stock has gained 106.2% so far this year to close yesterday’s trading session at $23.57.
This month SOL entered securities purchase agreements with several institutional investors for the sale of 10,000,000 ADSs at a purchase price of $25 per ADS in a registered direct offering. Also this month, SOL announced that it has signed a memorandum of understanding (MOU) with Eiffel Investment Group to establish a joint venture that is expected to provide financing for SOL’s Power’s current and future solar projects in Europe.
It is no surprise that SOL is rated Buy in our POWR Ratings system. It also has an A for Trade Grade, and a B for Peer Grade. In the Solar industry, it is ranked #5.
Sunworks Inc. (SUNW)
Headquartered in Roseville, California, SUNW provides photovoltaic (PV) based power systems for the residential, commercial and agricultural markets in California and Nevada, among other regions. The company also designs, finances, integrates, installs, and manages systems ranging in size from two kilowatts for residential loads to multi megawatt systems for larger projects. SUNW has installed more than 850 systems in California and Nevada.
The company reported revenue of $7.30 million for the third quarter ended September 30, 2020. Its reported gross profit $1.25 million. Analysts expect SUNW’s revenue to increase 10% for the quarter ending March 31, 2021 and 18.7% in 2021. The company’s EPS is expected to increase at a rate of 10% per annum over the next five years. On a year-to-date basis, the stock has gained 285.6%. It closed yesterday’s trading session at $19.74.
This month, SUNW appointed Gaylon Morris as its new CEO and a member of the Board of Directors, effective immediately. The company announced in December that it had sold roughly 3.8 million shares of common stock, raising roughly $20 million in gross proceeds. SUNW used a portion of the proceeds to fully repay the outstanding balance of a loan with CrowdOut Capital, Inc.
SUNW’s strong fundamentals are reflected in its POWR Ratings., It has a Buy rating with an A in Trade Grade and Peer Grade. Within the Solar industry, it is ranked #7.
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SPWR shares were trading at $50.64 per share on Thursday morning, down $1.70 (-3.25%). Year-to-date, SPWR has gained 97.50%, versus a 1.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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