Russia’s invasion of Ukraine has pushed oil prices higher. Several countries have had to rethink their energy policies, and increase their focus on renewable energy sources.
Furthermore, favorable policy developments, like the Bipartisan Infrastructure Law that allocates billions of dollars for clean energy, will drive higher demand for renewables. Per International Energy Agency (IEA) estimates, renewables will account for about 95% of the increase in global power capacity through 2026, with solar PV (photovoltaics) alone contributing more than half.
Using the TipRanks stock comparison tool for solar stocks, we can place Enphase Energy, First Solar and SolarEdge Technologies against each other to find the stock with better prospects.
Enphase Energy (NASDAQ: ENPH)
Enphase is a leading supplier of microinverter-based solar and battery systems, and has installed more than 42 million microinverters in over 130 countries.
The company is strengthening its position by enhancing its product offerings through continued innovation and strategic acquisitions, including the recent acquisition of ClipperCreek (a provider of EV charging solutions).
Despite challenging business conditions, Enphase delivered upbeat results in Q4 2021, backed by strong execution and solid demand for microinverters and batteries. Revenue grew about 56% year-over-year to $412.7 million, ahead of analyst estimates of $397 million.
Adjusted EPS of $0.73 increased 43% year-over-year and crushed analysts’ expectations of $0.58.
With regard to the supply chain bottlenecks, Enphase stated that the component availability is better than last year and it expects supply to meet demand as the year progresses.
Looking ahead, Enphase expects Q1 2022 revenue of $420 million to $440 million. Needham analyst Vikram Bargi noted that the better-than-anticipated guidance reflected continued growth in demand for batteries, partially offset by a modest seasonal drop in the demand for microinverters.
Bagri believes that “ENPH’s robust product pipeline in residential storage and small commercial applications, along with a focus and building traction in the international markets will expand ENPH’s SAM [Serviceable Addressable Market] and help fuel the next leg of growth, while the company gains share in its core U.S. residential solar market.”
Though component constraints might hinder near-term growth, Bagri feels that consistent financial results, a promising product pipeline, and improved profitability will drive the stock higher.
Bagri reiterated a Buy rating on Enphase stock and a price target of $255.
Consensus among analysts is a Strong Buy based on 17 Buys and four Holds. The average Enphase price target of $218.79 implies 8.1% upside potential from current levels.
First Solar (NASDAQ: FSLR)
First Solar manufacturers and sells PV modules, and also develops large scale solar projects. The company is known for its advanced thin film PV modules, which provide a high-performance, lower-carbon alternative to conventional crystalline silicon PV panels.
First Solar is investing significantly in its production capacity, with an aim to reach about 16 gigawatts of capacity in 2024, up from 7.9 gigawatts in 2021.
International project sales and increased module sales drove a 49% year-over-year rise in First Solar’s Q4 2021 net sales to $907 million. However, it fell short of analyst expectations of $917.7 million. The company’s EPS increased 14% to $1.23, topping analyst estimates of $1.06.
First Solar’s 2022 sales outlook of $2.4 billion-$2.6 billion and EPS guidance of $0.00-$0.60 reflected a decline from sales of $2.9 billion and EPS of $4.38 in the prior year.
Bagri explained that the weakness in 2022 guidance was due to higher freight costs, increased commodity prices, contract amendments, production start-up expenses, base average sale price declines and underutilization losses.
The analyst added “While we are constructive about the fundamental landscape and long term prospects of FSLR, we believe consensus earnings expectations for the company for next year are too high. We are cautious regarding the NT [near term] and wait for evidence of cost reductions, easing of freight issues and reduced execution risk.”
Bagri reiterated a Hold rating on First Solar stock owing to the near-term challenges, and lack of non-governmental upside catalysts. The analyst did not provide a specific price target.
Overall, the Street is also sidelined on the stock, with a Hold consensus rating that breaks down into four Buys, 12 Holds and two Sells. The average First Solar price target of $81.13 implies 4.1% downside from current levels.
SolarEdge Technologies (NASDAQ: SEDG)
Israel-based SolarEdge provides inverter solutions and power optimizers for the photovoltaic industry. It is Enphase Energy’s closest rival in the residential solar inverter market.
The company’s DC (direct current) optimized inverter maximizes power generation while lowering the cost of energy produced by the photovoltaic system. As of December 2021, SolarEdge has delivered about 83.9 million power optimizers and 3.5 million inverters in 133 countries.
SolarEdge serves various energy segments through its PV, storage, EV charging, batteries, Uninterruptible Power Supply (UPS), EV powertrains, and grid services solutions.
Impressive demand for SolarEdge’s products led to a 54% year-over-year growth in Q4 2021 revenue to about $552 million, beating analyst forecasts of $549.35 million.
Adjusted EPS grew 12.2% to $1.10, but lagged the Street’s prediction of $1.31. The company’s efforts to ramp up production in response to supply chain bottlenecks impacted the bottom line.
Recently, SolarEdge raised $678.5 million via an underwritten public offering of 2.3 million shares. Following the announcement of the public offering, Goldman Sachs analyst Brian Lee reaffirmed his Buy rating on the stock, with a price target of $432.
Lee feels that the proceeds from the equity sale will allow SolarEdge to take advantage of a potentially strong inflection in demand resulting from favorable energy policy shifts, particularly in Europe, and in pursuing M&A deals.
The rest of the Street is cautiously optimistic on the stock, with a Moderate Buy consensus rating based on 12 Buys, five Holds and one Sell. The average SolarEdge price target of $333.11 suggests 2.7% upside potential from current levels.
Conclusion
A favorable policy environment and accelerated adoption of solar power bode well for solar stocks.
While SolarEdge stock has outpaced Enphase and First Solar year-to-date, analysts are more bullish on Enphase stock due to robust growth prospects, as well strong execution.
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