The solar industry has had a bumpy 2022 as supply chain disruptions, rising production costs, and labor shortages have hampered the sector, but there’s no denying its long-term exponential growth. Over the last decade, solar energy has witnessed an average annual growth rate of 49%. This phenomenal growth is due partly to strong federal policies like the Solar Investment Tax Credit, which currently provides a 26% tax credit on solar investments.
Another factor that is fueling growth in the industry is declining prices for solar components and installation. The cost of solar has plunged 90% over the past decade, along with falling equipment and infrastructure prices. An average-sized residential system has dropped from a price of $40,000 in 2010 to roughly $20,000 today.
The growth in solar is hardly restricted to the residential sector. Solar power has helped many Fortune 500 companies cut back on costs. Apple, Amazon, Target, and Walmart have all invested heavily in solar production at various locations around the country. Apple is leading the way with more than 390 MWs of commercial capacity, and Amazon is a close second with 329 MWs.
Solar power isn’t going anywhere anytime soon, so continued growth can be expected in the long term. Business Insights projects that the $163 billion global solar industry will reach $194.75 billion by 2027, exhibiting a CAGR of 6%. This article will compare some of the top solar investments available.
The Invesco Solar ETF is a great way to gain exposure to solar without investing in just one stock. The fund seeks to track the MAC Global Solar Energy Index and is comprised of about 35 individual components — including both U.S. and international stocks. The fund follows a blended strategy, investing in value and growth stocks with various market caps.
TAN’s share price peaked in mid-February 2021 and has fallen 37% since. However, it could be an excellent opportunity to get in at a more attractive price, as growth in the solar industry will likely gain strength in the long term.
ETFs, by their nature, are often considered a less risky investment as they tend to be much less volatile than individual stocks. If you’re unsure about which solar stocks to buy and want to cut back on potential risk, TAN is a relatively safe way to add solar energy to your investment portfolio.
Invesco Solar ETF (TAN)
- Weighted Average Market Cap $8.10B
- Price / Earnings Ratio 44.39
- Price / Book Ratio 2.32
- YTD Return 8%
- Yield 0.10%
- Expense Ratio 0.66%
- Net Assets 2.31B
- Number of Holdings 147
- Top Holdings Enphase Energy, SolarEdge Technologies, Sunrun
Of course, compared to other solar investments, a less risky ETF investment probably won’t provide exponential returns in the near term. For investors with a higher tolerance for volatility, investing in an individual company is likely the more desirable choice. But due to high levels of competition in the space, not all solar companies are guaranteed to sustain. It’s essential to be selective when evaluating solar stocks and choose companies with a proven reputation and a strong balance sheet. In the next section, we’ll cover two of the top solar stock choices available.
Arguably one of the best-positioned names to benefit from the new act, First Solar Inc. (FSLR) is a leader in the solar industry. Unlike many burgeoning solar companies, they have a rock-solid balance sheet that can handle the challenges of an economic downturn.
One of the most popular solar stocks to buy, First Solar, provides solar panels and photovoltaic power plants. What sets the company apart from the competition is its ultra-thin semiconductor technology, which provides enhanced resilience and efficiency for its modules.
There is plenty of upside in the sector and room for growth. Overall, solar energy only accounts for around 2% of the total grid usage. First Solar is preparing for growing demand as that number is primed to increase.
FSLR was the beneficiary of multiple upgrades recently, including one from JPMorgan’s Mark Storuce, who upgraded the stock from Neutral to Overweight. “FSLR has nearly 3 GW of US-based module capacity, expanding to 5.9 GW by year’s end 2024 that will qualify for the domestic manufacturing tax credit,” he wrote, adding that the value of the credits could add $931 million to the company’s 2024 net income.
Founded in 2001, Canadian Solar Inc. (CSIQ) is a leading manufacturer of solar photovoltaic modules and a provider of solar energy solutions. CSIQ has delivered around 52 GW of solar modules to thousands of customers in more than 150 countries through the end of 2021, reaching approximately 13 million households. Canadian Solar derives roughly 47% of its revenue from Asia, 35% from the Americas, and 18% from Europe and everywhere else.
Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, having been publicly listed on the NASDAQ since 2006. The company has the potential to advance in the upcoming months based on its continued business growth, favorable earnings, and revenue outlook.
Benefitting partially from renewed interest in renewable energy solutions, Canadian Solar posted revenue of $1.25 billion in Q3 of this year, up nearly 15% from the $1.09 billion in sales posted in the year-ago quarter. CSIQ is up 16% year to date, while the Nasdaq index is down 29% during the same period, making Canadian Solar intriguing on a relative level. Moreover, the share price remains 40% below its February 2021 peak, and now may be a good time to buy before the next leg up.
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