The election of Donald Trump has renewed speculation about the future of clean energy stocks, particularly in the solar sector. With the White House controlled by Republicans and the GOP likely to have a majority in Congress, investors are bracing for possible changes to the Inflation Reduction Act (IRA), which has been critical to spurring clean energy growth. The Invesco Solar ETF, a key barometer of solar stocks, has fallen more than 7% this month and is down 35% year to date, reflecting market concerns about the sector’s prospects.
Adding to the pressure are concerns that Trump’s policies such as tax and tariff cuts could reignite inflation, coupled with already high interest rates that have created a harsh environment for clean energy companies. While these issues are putting significant pressure on solar stocks, they could also open the door for opportunistic investors to explore undervalued companies in the sector.
Why solar stocks can still shine
Despite concerns, clean energy may retain support under the Trump administration. A significant portion of the Inflation Reduction Act’s benefits, about 75%, went to Republican districts, prompting some GOP lawmakers to advocate maintaining its incentives. Additionally, Elon Musk, a Trump supporter and clean energy advocate, can influence policy to maintain or adapt, rather than eliminate, key incentives.
2 Solar Energy Stocks to Watch
First Solar: global leader in advanced photovoltaic solar solutions
First solar battery today
(As of 11/27/2024 6:05 PM ET)
- 52 week range
- $135.88
▼
$306.77
- P/E ratio
- 16.59
- Target price
- $279.04
First sunny NASDAQ:FSLR is a global leader in photovoltaic (PV) solutions for solar energy, specializing in advanced thin-film photovoltaic modules and large-scale solar power plants. The company has played an important role in the adoption of utility-scale solar energy around the world. Known for its strong financial health, First Solar maintains a strong balance sheet, as evidenced by its current ratio of 2.14, and effectively manages expenses to maintain profitability and impressive earnings.
In the third quarter of 2024, First Solar reported revenue of $887.7 million, up 10.7% year over year, although its earnings per share of $2.91 missed analysts’ estimates by $0.19. Despite the headwinds in the sector, First Solar’s valuation looks attractive after a sharp 27% decline over the past six months. The stock is currently trading at a P/E ratio of 15.67 and a forward P/E of just 8.85, suggesting potential value from relatively strong earnings growth of 41% over the past five years. These metrics highlight a compelling risk-reward profile for long-term investors.
Analysts certainly think so. Based on estimates from 27 analysts, the stock has a Moderate Buy rating and 24 analysts have a Buy rating. Notably, the stock’s consensus price target of $280.50 projects a whopping 53.5% upside potential.
Invesco Solar ETF: Diversified exposure to the solar industry
Invesco Solar ETF today
Invesco Solar ETF
(As of 11/27/2024 ET)
- 52 week range
- $33.79
▼
$54.62
- Dividend yield
- 0.12%
- Assets under management
- $872.80 million
For investors looking to diversify their exposure to the solar industry, the Invesco Solar ETF NEW YORK: ONLY offers an interesting option. By tracking the MAC Global Solar Energy Index, TAN provides broad investments in many solar-focused companies, including solar equipment manufacturers and service providers.
The ETF’s global diversification includes nearly 50% exposure to U.S. companies, as well as additional holdings in regions such as Israel, Germany and the Cayman Islands. Notable holdings include industry leaders First Solar, NextTracker, Enphase Energy and Sunrun. With assets under management of $842 million and an average daily trading volume of 1.2 million shares, TAN offers a stable, liquid and diversified approach to investing in the long-term growth potential of the solar industry.
Opportunity amidst uncertainty
The market reaction to Trump’s election has been swift and negative for solar stocks, but the selloff could present a chance to buy quality stocks at discounted prices. With bipartisan benefits from the IRA and influential voices like Elon Musk advocating for clean energy, the sector’s long-term prospects could remain intact, even in a changing political landscape.
Before you consider the Invesco Solar ETF, here’s what you might want to hear.
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