Goldman sees a ‘meaningful ramp-up’ in solar ahead and gives the best ways to play it
According to Goldman Sachs, tax breaks under the Inflation Reduction Act are likely to drive up solar demand in the US. And the firm sees stocks that will benefit from an internal push. The law provided for a 30 percent loan for the installation of solar panels or other equipment using renewable energy sources. But people must act over the next nine years to reap the maximum savings. A 30% credit may apply to projects completed between January 1, 2022 and the end of 2032. Projects completed in 2033 and 2034 are only eligible for a credit of 26% and 22%, respectively. “We expect the U.S. will also see a significant increase in solar energy use, catalyzed by extended stimulus in the next decade under the Inflation Reduction Act, and visible signs of a meaningful deployment of renewables in China are likely to drive sustainable expansion elsewhere.” “. This was stated by Goldman Sachs analyst Bryan Singer in a note to clients on Monday. But he said rising interest rates and volatility in the banking sector could hurt early-stage investment and focus on renewable energy companies with strong US corporate returns and balance sheets. Singer also expects China to accelerate its transition to renewables and peak emissions by the end of the decade. Given that China currently owns about 90% of the solar energy supply chain, rising solar demand in China could dampen U.S. growth, even if U.S. demand is there, Singer said. Because of this, he recommends solar stocks that are widely used for supply chain diversification and trending, and have solid business fundamentals. According to FactSet, CNBC Pro has compiled year-to-date performance for each stock, the proportion of analysts with a buy or overprice rating, and expected average gains or losses. Here’s the list: Even though Enphase suffered a setback this year, it’s popular on Wall Street and is seen as poised for a bounce back. About three out of every four analysts rate the stock as a buy, with the average analyst price target suggesting the stock could rise just over 52% over the next year. It has the largest average upside potential of any stock on Singer’s list. Singer said he likes Enphase because of its above-average returns and because it is one of the least owned on the list of environmental, social and governance funds, meaning the stock may not be as overbought. He likes MasTec and General Electric for the same reasons. Raymond James, meanwhile, said in an update to outperform last week’s market performance that the company’s growing European business could be a tailwind to sold-off shares. “We are positively reviewing Enphase for the first time since 2013, ancient history by solar industry standards,” Raymond James analyst Pavel Molchanov said in a note to clients. “This update is part opportunistic and part thematic.” Singer also likes Array Technologies given its above-average expected returns and because it is more widely owned by ESG funds, which he says could mean there is a consensus that it will perform well going forward. The stock has buy ratings from nearly four out of every five analysts, and the average price target suggests the stock will rise nearly 40% next year after rising just 1.6% in 2023. Last week, the company reported on a per-share basis. according to FactSet, adjusted earnings were in line with analysts’ expectations of 10 cents. The company’s revenue beat the consensus estimate of $402.1 million. The management of the array also confirmed its forecast for the year. Singer also loves SolarEdge for its profitability and pervasiveness in the ESG space. While the stock has lost nearly 1% since the start of the year, analysts expect it to rise more than 30% over the next 12 months. Seven out of every 10 analysts recommend the stock as a Buy. Meanwhile, Singer said First Solar should particularly benefit from the push to expand in-house renewable energy capacity. While the stock has risen more than 40% since the start of 2023, analysts expect the stock to fall 1.3% over the next year. Still, nearly two-thirds of analysts believe the stock is worth buying. —Michael Bloom of CNBC /span>
