Solar stocks have gone through various boom and bust periods as investors excitedly pile into them only to see their potential pushed further down the road. Unlike the electric vehicle market, which has finally caught traction, solar companies — and renewable energy companies in general — have not yet reached the point of critical mass at which widespread deployment is inevitable. However, for patient investors who pick the right stocks, the promise of solar may one day produce sizable investment returns, especially if favorable legislation provides the industry with a tail wind.
Which Solar Stocks Are the Best To Buy?
Here are 10 of the best solar stocks for investors to look at in conjunction with a financial advisor who can offer some perspective regarding risk and reward:
- Enphase Energy Inc. (ENPH)
- Sunrun Inc. (RUN)
- First Solar Inc. (FSLR)
- Array Technologies Inc. (ARRY)
- Daqo New Energy Corp. (DQ)
- Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI)
- SolarEdge Technologies Inc. (SEDG)
- Canadian Solar Inc. (CSIQ)
- Sunlight Financial Holdings Inc. (SUNL)
- SunPower Corp. (SPWR)
Enphase Energy Inc. (ENPH)
Enphase Energy is one of the most promising solar companies for many investors, as it’s already growing sales and earnings rapidly. Analysts are behind the stock, giving it a consensus rating of “buy” and offering a 12-month price target of $300.21 — nearly 35% above its closing price of $222.93 on Feb. 3. The company provides a complete home solar solution that includes everything from the generation of solar power to its storage in a single platform. In 2022, a tough year for the stock market, Enphase Energy rose 57%.
Sunrun Inc. (RUN)
Sunrun is the biggest solar company when it comes to installation of panels, making it worth a look for those wanting exposure to the space. The company acquired its largest competitor, Vivint, in 2020, further establishing Sunrun as the No. 1 installer. The vast majority of Sunrun customers lease their panels from the company, rather than buying them outright. The stock is up 15% so far in 2023, and its price-to-earnings ratio of 83 suggests it might be overvalued. However, analysts have a “buy” rating on the company and expect a 64% return over the next 12 months.
First Solar Inc. (FSLR)
First Solar is one of the few solar companies that don’t rely on polysilicon for their panels, which helps it avoid some of the supply chain issues currently plaguing its competitors. First Solar uses cadmium-telluride technology, which also means the company can avoid the issues surrounding the Xinjiang region in China, as noted by U.S. News & World Report. According to Max Slee, an Ecofin portfolio manager quoted in U.S. News, these factors mean that “we would expect First Solar to increase global market share of solar panels and in some regions command a price premium to more conventional crystalline silicon competitors.”
The stock is up a whopping 143% year over year, and analysts expect it to gain another 3% in the next 12 months.
Array Technologies Inc. (ARRY)
Array Technologies offers investors the chance to make their bet on technology rather than the nitty-gritty of solar panels themselves. The company’s main competitive advantage is its proprietary tracking technology that turns solar panels toward the sun as it moves across the sky, thereby improving the panels’ efficiency. Array acquired a leading European solar-tracking company, STI Norland, in January 2022, further enhancing its competitive advantage. The stock is up about almost 4% year to date in 2023.
Daqo New Energy Corp. (DQ)
Daqo New Energy Corp. offers investors a way to invest in the solar panel supply chain rather than the construction of the panels themselves. Earnings are booming at the Chinese company, which mines the elements that are used in solar panel production, namely polysilicon. In Q3 2022, the company’s gross profit was nearly $1 billion. Analysts see a gain of nearly 45% over the next 12 months, after posting a YTD gain of about 9% in 2023.
Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI)
Investors looking for a bit of a different angle when it comes to the solar industry might consider Hannon Armstrong. Rather than being a direct play on solar energy equipment or production, Hannon Armstrong is a real estate investment trust that owns various companies in the renewable energy space. Thus, this stock is more of a dividend play, although it also offers the opportunity for capital appreciation. Hannon Armstrong pays a current yield of 3.98%, and shares are up almost 35% since the beginning of the year.
SolarEdge Technologies Inc. (SEDG)
Solar storage has long been the bugaboo of the industry. Although solar panel technology continues to advance exponentially, the storage of the energy produced becomes problematic. SolarEdge Technologies is one of the companies working on solving that problem, providing both traditional solar services along with battery storage. As quoted in U.S. News & World Report, Ecofin portfolio manager Max Slee said that the company’s “in-house battery cell manufacturing should deliver attractive earnings growth.”
Canadian Solar Inc. (CSIQ)
Investors looking for exposure north of the border might be interested in Canadian Solar Inc., which creates solar panels for large projects. Revenues are booming at the company, reaching $1.93 billion in Q3 2022, a 57% increase year over year. Analysts have a “buy” rating on the stock and see gains of about 2% in the coming 12 months.
Sunlight Financial Holdings Inc. (SUNL)
Another alternative way to play the solar space is to invest in financial companies that finance the industry. In this regard, Sunlight Financial Holdings Inc. may be an interesting play. The company is certainly speculative, as it only came to market in 2021 as a special purpose acquisition company, it trades in the low single digits, and it is down about 57% over the past year. For those who can tolerate the high level of risk, however, analysts see a potential 12-month gain of 55%, and their consensus is that it’s a buy.
SunPower Corp. (SPWR)
SunPower is a residential provider of solar panels that also installs and finances them. When the company acquired Blue Raven Solar in 2021, its CEO, Peter Faricy, said that the company was “doubling down on residential growth.” In the company’s Q3 2022 results, it reported record earnings and revenue. It was also named the “best solar company overall” by CNET.
The solar energy sector likely still has a long runway before it reaches mass adoption, but that could make it a good opportunity for investors with the patience and risk tolerance to wait for the best stocks to surface.
- What is the best solar stock right now?
- Solar stocks in general tend to be more volatile than the overall market, so for some investors, there is no best solar stock. For those who can tolerate the ups and downs, however, there could be potential long-term gains. The best solar stock for you is the one that matches your own personal investment objectives and risk tolerance.
- Is solar energy stock a good investment?
- Solar energy offers good long-term potential, but investors will have to do some research and sort through all the competitors to pick the companies that will end up on top.
- Do any solar companies pay dividends?
- A number of renewable energy companies pay dividends, although they are generally not purely solar-focused. Dividend-paying “solar” stocks are typically more mature utilities that also have some solar exposure.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Feb. 6, 2023, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.