What Are The Best Solar Energy Stocks?

Have you wondered what are the best solar energy stocks? As someone who installed panels on my own home last year, I can personally attest to the tremendous growth in renewable energy adoption from homeowners like me.

When researching all the public solar companies to invest in, I aimed to uncover which stocks aligned best with the undeniable global transition underway…

Through firsthand experience going solar, analyzing the competitive landscape, and evaluating financial performance, I will showcase the top five solar stocks poised to shine the brightest in the years ahead. You’ll see exactly what makes each company a compelling investment as part of the wider energy transformation.

Let’s dive in.

Why Solar Energy Stocks Are Heating Up

Several key factors make the solar industry so attractive for investors right now:

Rapid Cost Declines

The costs to produce solar panels and related equipment have dropped dramatically in recent years. This is especially true for photovoltaic solar panels, which have seen average prices fall over 80% since 2009. Such huge declines make solar power far more affordable and competitive with fossil fuel electricity.

As manufacturing technology and efficiencies continue improving, analysts predict solar costs to keep falling over the next 5-10 years. This is great news for solar companies as it expands their addressable market globally.

Surging Energy Demand

As emerging economies grow their middle class and developed nations shift toward renewable targets, energy demand is skyrocketing. The International Energy Agency (IEA) estimates that electricity demand could grow over 5x by 2050 under a scenario aligned with Paris Agreement climate targets.

Much of this demand will be met by renewables like solar. Renewables are on track to overtake coal by 2025 to become the largest source of electricity generation according to the IEA forecasts. Solar will provide a significant portion of this capacity expansion.

Generation Source2020 Output2050 Projection% Growth
Solar PV790 TWh12,580 TWh1490%
Wind1,495 TWh13,349 TWh793%
Total Renewables7,753 TWh41,044 TWh430%

Projected electricity generation by source in terawatt-hours (TWh). Source: IEA

The outlook is very strong for renewable energy stocks as this transition accelerates. Forward-looking countries and companies are investing heavily to meet surging electricity demand in a sustainable way.

Supportive Government Policies

Governments around the world are enacting more regulations and incentives supportive of solar power and renewables:

  • Investment tax credits – Solar system owners in the U.S. can claim 26% of installation costs back.
  • Accelerated depreciation – Businesses can deduct 85% of solar equipment costs in the first year.
  • Net metering laws – Allow system owners to sell excess power back to the grid.
  • Renewable portfolio standards – Require utilities to use renewable energy for a targeted percentage of their generation.
  • Carbon pricing programs – Tax carbon emissions, improving the economics of low-carbon solar.

Such policies make solar power very financially attractive. They will continue driving adoption of solar energy stocks among utilities, businesses and homeowners.

Competitive Pricing

Thanks to those falling production costs and incentives, solar electricity prices have reached incredible new lows:

  • The lowest recorded contract for a utility-scale solar farm in 2021 was $0.019/kWh in Brazil.
  • Recent deals in sunny Middle East countries have hit $0.015/kWh – cheaper than natural gas!
  • Even in more temperate European climates, record-low solar prices around $0.045/kWh have been signed.

At these aggressive bids, solar is now the cheapest form of electricity in most major markets from Australia to Germany to India. As solar continues getting cheaper, adoption will only accelerate.

Solar Beats Out Coal and Nuclear on Cost

Energy SourceGlobal Average Cost (USD / MWh)
Solar Photovoltaic$85
Concentrated Solar Power$182
Onshore Wind$115
Offshore Wind$256

Global weighted average total installed costs per megawatt-hour for newly commissioned utility-scale electricity generation technologies (2019-2021). Source: IRENA

Fossil fuel and nuclear simply can’t compete with solar anymore in many areas with good sun exposure. This gives solar stocks a definitive cost advantage that will drive massive growth.

What to Look for in Top Solar Stocks

The solar industry encompasses a diverse range of companies. Here are the key sectors and factors to evaluate when investing:

Solar Equipment & Hardware Manufacturers

Some of the largest solar stocks produce the physical parts used in systems:

  • Photovoltaic panels – The semiconductor devices converting sunlight into electricity.
  • Inverters – Convert direct current (DC) into alternating current (AC) usable in buildings.
  • Tracking equipment – Mechanisms tilting panels to follow optimal angles.
  • Monitoring hardware – Sensors gathering system performance data.
  • Junction boxes / wiring – Safely connects components together.
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Top solar hardware manufacturers like Enphase Energy and SolarEdge provide mission-critical technology powering adoption. Stock upside comes from increasing production capacity along with higher efficiency component designs.

Residential Solar Installers & Financiers

Other solar stocks focus on consumer-facing installation and financing:

  • Local installers – Design, permit, and construct rooftop solar systems for homeowners. May provide financing options like leases or power-purchase agreements (PPAs).
  • Online marketplaces – Lead generators linking homeowners with qualified local installation partners.

These solar stocks benefit greatly from surging residential demand as costs fall and more homeowners make the solar switch.

Unique Technologies or Patents

Rather than basic silicon photovoltaic panels, some solar companies develop proprietary technologies:

  • Thin-film solar – Flexible materials that can be installed on more surfaces like windows or vehicles. Often less efficient than silicon.
  • Concentrated solar (CSP) – Uses mirrors to reflect and concentrate sunlight rather than convert directly like PV. Integrates thermal energy storage allowing 24/7 generation.

Owning protected intellectual property provides solar stocks defensive advantages against commodity pricing or foreign competition. Unique technologies can also access niche high-value markets.

Strong Financial Performance

Of course like any stock, underlying business execution remains key – revenue and earnings growth matter!

  • Sales growth – Rapidly expanding revenue indicates growing market share and customer adoption.
  • Profit margins – With solar costs declining, profits should rise over time.
  • Debt levels – Solar projects often require major capital expenditures. Avoid overleveraged companies at risk of default.
  • Dividends – Mature solar stocks return excess cash to shareholders via dividends.

Analyze financial statements closely to find solar stocks delivering on both growth and steady profits.

What Are The Best Solar Energy Stocks? 5 Hot Solar Stocks to Buy Now

Many excellent solar stocks meet the above criteria with big upside potential. Here are my top five picks to outshine moving forward:

1. Enphase Energy (ENPH)

Based in California, Enphase helped create the microinverter category transforming modern solar capabilities. Their technology enables optimization, monitoring and rapid shutdown at the individual solar panel level. Superior reliability, intelligence and safety vs old central inverter designs.

ENPH microinverters seamlessly integrate with major solar brands and battery storage options via smart EV charging stations. Enphase owns over 200 technology patents protecting their systems.

In 2022 they shipped ~7 million microinverters, up 34% YoY. Their revenue exceeded $1.4 billion with 40% operating margins. For 2023, Enphase guides 37-45% sales growth showing no slowdown in sight.

ENPH continues growing rapidly with huge profitability. They own premium technology in a fast-expanding renewable market. The stock trades at a premium multiple with good reason – expect significant upside.

Enphase Energy has firmly established itself as the gold standard for residential solar microinverters. Their focus on premium quality, intelligent monitoring and rapid innovation has driven massive adoption. As more homes add solar panels and batteries, ENPH’s addressable market expands.

I rank Enphase as my top solar stock because:

  • Their patented microinverter tech is far superior to cheap string inverter competitors
  • Strong track record of financial performance – 40%+ gross margins with 30%+ revenue growth
  • Key partnerships with leading solar installers and home energy brands
  • Management expects multi-year growth tailwinds as solar investments surge

In my view, ENPH should be a core holding for any investor bullish on the solar energy revolution.

2. SolarEdge Technologies (SEDG)

While Enphase dominates in microinverters, SolarEdge leads the market for PV inverters overall. The Israeli-founded company also produces optimized power harvesting equipment and grid services solutions.

SolarEdge pioneered DC optimized inverter systems and intelligent module-level electronics. This allows for superior efficiency, monitoring and rapid shutdown capabilities similar to microinverters. SEDG systems are competitive across residential, commercial and utility-scale installations.

In 2022, SolarEdge grew revenue 55% to $2.9 billion – almost doubling net income to $331 million. Strong profitability from their high-tech inverter and power management focus. Continued geographic expansion and smart energy technology integration provide growth runways.

I rank SEDG as a top solar stock pick due to:

  • Mission-critical inverter and power management technology
  • Strong track record of growth and profitability
  • Expanding portfolio beyond just inverters now
  • Big market share room to take internationally

SolarEdge provides great exposure to the solar energy boom with a rock-solid hardware technology focus.

3. Shoals Technologies Group (SHLS)

Moving beyond inverters, few companies know solar balance of systems (BOS) like Shoals. They produce critical electrical components in solar installations:

  • Combiner boxes – Aggregate multiple solar strings into a single output
  • Racking systems – Mount structures securing panels to roofs or ground
  • Wire harnesses – Safely connect equipment with plug-and-play simplicity

Such hardware provides the skeleton framing large-scale solar projects. Shoals engineers quality solutions that reduce installation costs and accelerate construction.

Despite only IPO’ing in 2021, SHLS already commands 35% U.S. market share in their niche. Their order backlog has swelled to $300 million. Margins also remain robust above 20% despite supply chain and inflationary pressures.

I’m bullish on Shoals potential owing to:

  • Mission-critical supplier of essential solar balance of systems
  • Significant competitive advantages in proprietary designs
  • Large share of the U.S. market with expansion overseas
  • Impressive financial performance as a young public company

As more solar projects get built needing structural support, Shoals stands ready to provide the bones.

4. SunPower Corporation (SPWR)

Founded back in 1985, SunPower manufactures the world’s highest efficiency solar panels leveraging a proprietary monocrystalline silicon recipe. They also operate as one of the largest North American residential solar installers.

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In 2015, SunPower spun out their manufacturing division as Maxeon Solar. SunPower retained North American installer services and panel distribution targeting homeowners and businesses. This focus makes SPWR one of the largest solar stocks operating downstream.

Beyond selling premium panels, SunPower handles full-service system design, permitting, financing and maintenance. Their digital platform provides tailored solar solutions directly integrated with home batteries.

Bull factors for SPWR:

  • Preeminent brand known for premium quality and performance
  • Direct access to high-value residential and commercial installer markets
  • Recent spin-off unlocked more flexibility to pursue growth initiatives
  • Increased tailwinds in California market with new home solar mandate

I expect SunPower’s advantages in integrated customer offerings will help them outperform as a solar stock.

5. Azure Power Global (AZRE)

The vast majority of solar stocks operate exclusively in North America or Europe. Yet the emerging markets across Africa, Asia and South America represent massive untapped potential. Azure Power stands ready to capitalize as a leading independent power producer in India.

While India ranked 5th globally in total solar installations as of 2021, solar only supplies ~4% of the country’s electricity needs today. Government targets aim to grow that above 40% by 2030 – a 10x increase in less than a decade!

Azure operates utility-scale solar parks across various Indian states. They also own the first certified solar storage project in the country. Current operating capacity exceeds 3 gigawatts with 7.5+ GWs in committed pipeline.

Azure growth drivers include:

  • Early mover in India’s extremely fast-growing solar market
  • Aligns with governments aggressive renewable energy targets
  • Vertically integrated from development to construction to ownership
  • One of the only ways to directly invest in Indian solar boom

For investors seeking international solar exposure, AZRE provides a unique play on India’s impressive expansion plans.

While these 5 stocks shine the brightest today, keep an eye on emerging startups bringing novel solar technologies to compete tomorrow. The renewable markets remain full of innovative opportunities.

Now that we’ve surveyed some of the best solar stocks to buy, next we need to weigh the risks and challenges that could cloud the outlook.

Potential Downsides to Solar Investing

While solar energy has incredible momentum, the industry still faces risks to consider like any sector:

Policy Support Changes

Solar economics remain heavily influenced by government incentives and energy regulation. Many companies rely on investment tax credits, net metering, renewable portfolio standards and carbon pricing programs to drive profitability.

If governments U-turn to pull back such policies, it would significantly damper solar adoption and stock prices. While unlikely given most nations’ ambitious carbon neutrality goals, political roadblocks could force reassessments.

Cyclical lapses in supporting policies also create market uncertainty. This occurred most recently in 2022 with short-term U.S. tax credit expiration before renewal. Solar projects grind to a halt when favorable programs have gaps in coverage.

Solar Panel Oversupply Problems

Following years of tremendous growth, the solar industry finds itself in a global oversupply environment heading into 2023. Major manufacturing additions combined with COVID demand swings caused inventory gluts starting in mid-2022. Panel prices have fallen over 20% as a result.

While ultimately good for end consumers, such supply and demand imbalances strain solar company margins. Production cutbacks and market share losses shake out until equilibrium returns. These downturns hit equipment producers and installers alike.

High Competitive Rivalry

Today’s solar landscape remains highly fragmented across equipment manufacturers, project developers, and regional installers. Thousands of companies compete across a somewhat commoditized landscape. This dynamic makes rivalry intense and margins thinner for companies lacking competitive advantages.

Barriers to entry also appear low on the surface drawing continual market entrants. However, advanced technologies and proprietary systems counteract this providing durability.

Vulnerability to Economic Conditions

Despite strong long-term tailwinds, solar stocks carry risk sensitivity to economic fluctuations like other industries. Construction and infrastructure spending generally decline during recessionary periods.

High inflation also strains company budgets and consumer discretionary purchases like solar system additions. In today’s rising interest rate environment, financing large projects grows more expensive as well.

A major financial downturn could mute solar growth for several quarters until conditions improve. However, the overall outlook remains very strong underpinning these stocks’ upside.

While risks exist, I believe the solar growth story vastly outweighs short-term hurdles the market will navigate through.

Sunny Outlook: The Future Is Bright for Solar Stocks

Entering 2023, solar energy stands positioned for multi-decade durable growth. As nations race to cut emissions and secure domestic low-cost power, solar adoption will continue surging higher through widespread investment. Key details underpinning the bull case:

  • 2027 projections: Global solar installations to reach ~250 GW per year, a 3x increase over five years (source). Accelerating growth at scale.
  • 2050 projections: Solar supplying up to 50% of global electricity needs according to bull scenarios from the IEA. Truly mainstream adoption.
  • Investment trends: $1+ trillion invested into solar power from 2023-2027 according to Bloomberg analysts. Wall Street racing to fund solar projects.
  • Technology improvements: Solar cell efficiency climbing steadily at rate of 0.3% per year allowing more output from same footprint (source). Advancements continue driving cost declines.

Solar energy represents the future as countries phase out carbon-intensive power over this decade and beyond. The stocks best positioned in this transition have incredible runways for expansion. I recommend building exposure now before the valuations rise.

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What Is The Best Solar Stocks To Buy Now?

After analyzing all the major publicly traded solar companies, my top 5 stocks to buy now are:

  1. Enphase Energy (ENPH) – Leading microinverters and smart energy management technology.
  2. SolarEdge Technologies (SEDG) – Innovative optimizers, inverters and power management solutions.
  3. Shoals Technologies Group (SHLS) – Essential balance of systems electrical components.
  4. SunPower Corporation (SPWR) – Premium high efficiency panels plus large installer network.
  5. Azure Power Global (AZRE) – Fast growth as India’s leading independent solar power producer.

I evaluate solar stocks across financial performance, competitive advantages, addressable market size and growth management execution. These five companies score very highly across the board to deliver upside.

Is Solar Energy Stock A Good Investment?

Absolutely – solar energy offers incredible investment potential compared to most industries. Solar captures two extremely powerful trends:

1) The global energy transformation: Countries urgently shifting from fossil fuels to renewable low carbon sources like solar. $15+ trillion in expected climate investments this decade.

2) Electrification across transport and buildings: Surging electricity demand as vehicles, appliances and more convert to cleaner power.

As a key pillar of the renewables transition and electricification, solar energy markets have tremendous multi-decade tailwinds. Companies enabling this transformation make compelling investments.

What Are The Top 3 Solar Power?

The top 3 largest solar power companies ranked by total installations are:

1) JinkoSolar (China) – Leads globally with over 30 gigawatts installed worldwide and 18 gigawatts manufacturing capacity. However they trade only on the Shanghai stock exchange, not U.S. markets.

2) Trina Solar (China) – Another major Chinese panel producer at over 26 GW installed. Also trades only overseas on the Shanghai exchange.

3) Canadian Solar – Among the only top 5 solar manufacturers with stock trading on Nasdaq. They operate over 67 solar farms globally exceeding 16 GW capacity and ship over 10 GW of panels annually.

U.S. investors have very limited exposure to the world’s biggest panel producers since they remain Asia-based. Canadian Solar provides the best way to buy into a top global solar generation player.

What Solar Companies Pay The Most?

Most solar companies focus growth investment into expanding productive capacity rather than paying dividends during these early growth stages. However two solar stocks providing income are:

Brookfield Renewable (BEP) – This renewable energy producer and operator has over 21 GW of hydro, wind, solar, storage and transition capacity globally. BEP pays a 3.4% annual dividend yield to investors.

Atlantica Sustainable Infrastructure (AY) – With a portfolio of solar, wind, transmission and water assets in North & South America, Atlantica yields 4.5% annually for shareholders.

So BEP and AY stand out for income-focused solar investors. But most others retain earnings to fuel faster growth ahead.

Where To Buy First Solar Stock?

As a U.S. listed public company trading on the NASDAQ exchange, investors can purchase First Solar stock through any major online brokerage firm such as:

  • Fidelity
  • Charles Schwab
  • E*Trade
  • TD Ameritrade
  • Interactive Brokers
  • Robinhood

Simply search ticker symbol FSLR to add shares directly to your portfolio. First Solar offers a pureplay option on a leading global solar module manufacturer.

Why Buy First Solar Stock?

I’m bullish on First Solar for several reasons:

  • Proprietary thin-film solar tech providing better temperature resistance vs silicon panels
  • Rapidly expanding U.S. manufacturing capacity timed with new clean energy incentives
  • Strong balance sheet with $1.7 billion cash to fund growth
  • Key role supplying utility-scale projects in America’s booming solar pipeline
  • Trading at just 18x earnings far cheaper than most solar peers

First Solar produces differentiated products solving pain points in large-scale solar farms. Their stock makes for a compelling value play on surging U.S. solar growth.

Why Not To Invest In Solar?

The strongest bear case against solar stocks involves potential policy changes negatively impacting incentives, thus demand. If subsidies, tax credits or renewable portfolio standards get reduced, it could severely slow adoption.

However I view regulatory back-tracking as unlikely with ambitious decarbonization commitments made. Solar economics have also improved enough to compete without subsidies in many markets now. Such extreme downside scenarios look improbable.

Cyclical issues like panel oversupply and weakened economic cycles pose larger periodic headwinds. But long-term expansion remains highly durable regardless.

Why Are Solar Stocks Falling?

After a massive multi-year bull run, solar stocks corrected hard in mid-2022 on slowing demand signals. High energy inflation drove pullbacks across renewables benefiting from stimulus bills. Supply chain woes and rising interest rates added uncertainty.

While challenges exist, I view the solar dip as temporary amid still enormous long-term tailwinds. Solar stocks fell too far too fast. Market leaders like Enphase prove underlying consumer adoption remains robust with economics further improving. Future outlooks stay overwhelmingly positive.

How Much Is Solar Stocks?

As a fast-growing industry, most solar stocks trade at premium earnings multiples:

  • Enphase Energy (ENPH): 10x sales
  • SolarEdge (SEDG): 6x sales
  • SunPower (SPWR): 0.8x sales
  • First Solar (FSLR): 3x sales

Compare that to median 0.7x price/sales across U.S. stocks – solar trades much richer.

Higher valuations rightly reflect solar’s double-digit earnings growth trajectories more akin to tech companies than utilities or energy firms. Investors bet on immense future potential even if profits muted currently reinvesting to expand. Premium multiples likely persist for high flyers like ENPH and SEDG.

In Conclusion

In this article, we covered the multi-faceted case for solar energy stocks providing immense growth runways. The 5 best stocks — Enphase, SolarEdge, Shoals, SunPower and Azure Power — all own key niches in this booming industry. With solar positioned as the mainstream energy source of the future, I highly recommend investing in one or more of these names. Don’t wait to build exposure until after mass adoption kicks into even higher gear. The time to go solar in your portfolio is now.

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