Energy stocks have made a nice comeback of late, primarily due to rising oil and natural gas prices. But there’s another slice of that sector that has been trading at a discount but is poised for more significant long-term growth, thanks to both improving technology and governmental support, both in the U.S. and internationally—and that’s the solar power business and solar power stocks.
In 2021, the U.S. added 23 GW of solar capacity, accounting for 46% of all new electricity-generating capacity. That added capacity brought the U.S. to a total installed base of more than 120 GW, more than double the pre-pandemic installed base of 45.5 GW. And that growth should continue, with solar capacity forecast to more than double over the next five years.
Internationally, the northern European countries are ahead on a Watt per capita basis, but China already has the greatest installed solar capacity, with more than 300 GW installed and more than 54 GW installed in 2021 alone.
Someday, the giants of this industry will be well-known behemoths, whose names will roll off the tongue just as ExxonMobil and Con Edison and Florida Power and Light do today. But at the moment, it’s a real horse race, with more than a dozen fast-growing public companies racing to both get big fast and to deliver earnings to their shareholders—which means there are great investment opportunities in solar power stocks.
Today, I look at nine of my favorite solar power stocks, in the hopes of helping readers identify opportunity.
The 9 Best Solar Power Stocks
Enphase Energy (ENPH)
Located in sunny California, Enphase is the world’s leading supplier of microinverters, which convert direct current (DC) energy from solar modules into alternating current (AC). Its products are used all around the world (U.S., Europe, Australia), though it’s notably weak in the Chinese market. And it has recently begun selling battery storage systems.
Daqo New Energy (DQ)
Daqo is a Chinese company focused on silicon, the raw material behind the word’s solar panels. Selling directly to manufacturers, it has a concentrated customer base. Daqo has been consistently profitable for years—though patterns are uneven.
Sunova Energy (NOVA)
Based in Houston, Sunova offers residential solar power systems and backup batteries in 20 states using a variety of power purchase and lease arrangements (which tend to provide great visibility into future revenue streams). There are currently no earnings, as the company is investing for the future.
Vertically integrated JinkoSolar is the world’s leading maker of silicon wafers, solar cells and modules, which it makes in China and sells to companies all over the world.
Sunrun is the leading residential solar installer in the U.S., with about 16% market share. Customers sign 20- to 25-year contracts, so future cash flows are very visible.
SolarEdge Technologies (SEDG)
Based in Israel, SolarEdge is the second microinverter company in the industry, and like Enphase, it too sells all over the world.
Canadian Solar (CSIQ)
Based in Ontario, Canadian Solar is the world leader in making and installing utility-scale solar power, having delivered systems to customers in over 150 countries.
The granddaddy of the industry, founded way back in 1985, Sunpower is based in California, where it manufactures solar cells and modules.
First Solar (FSLR)
Arizona-based First Solar makes and sells solar cells and modules for residential and commercial markets all over the world. But the company is mature, struggling to maintain growth. FSLR was a hot stock back in 2007, but it’s been trending sideways for several years.
How to Choose the Best Solar Company to Invest In
The ideal combination would be a company with:
- strong (even accelerating) revenue growth,
- strong earnings growth, a good growth story,
- and a strong chart that’s hit recent record highs and is now on a normal pullback.
Lastly—and this is hard to quantify—the ideal stock is not over-owned and has great potential to climb higher as more investors become aware of it and develop positive opinions about it.
None of these solar power stocks meet all these criteria, which is not surprising. But the ones that come closest are Enphase (ENPH), JinkoSolar (JKS) and Solaredge (SEDG).
How to Invest in Renewable Energy
As you search for solar stocks, don’t forget that there is an entire renewable energy industry. Electric vehicles are becoming more common, and General Motors (GM) plans to sell only zero-emission vehicles by 2035. Wind and hydroelectric power is a growing force in renewable energy solutions.
Alternatively, if you want a somewhat diversified way to invest in companies that are trying to improve energy efficiency, Hannon Armstrong (HASI) should be up your alley. The company provides capital to companies in the energy efficiency, renewable energy and other sustainable infrastructure markets. In exchange for capital to advance their businesses Hannon generates recurring revenue and predictable cash flows. And the stock, while down in 29% YTD, has weathered the recent market better than many renewable energy companies.
What else would you like to know about solar power stocks? Leave your question in the comments below.
*This post has been updated from an original version, published in 2020.