Goldman Sachs Says Solar Stocks Are Poised for a Huge 2020

After a solid 2019, the outlook for the top clean technology solar stocks looks very promising for 2020. When you toss in the geopolitical issues that arose in the Middle East recently, the industry may be even more attractive. While the drive for clean technology and energy generation remains at the forefront of important current issues, these stocks tend to go in-and-out of favor.

In a recent research report, Goldman Sachs is positive on some of the top companies in the industry, and the analyst noted this when discussing the 2020 potential:

Following last year’s cyclical bounce-back, we see solar stocks poised to outperform again in 2020 on the back of strong demand fundamentals. Our forecast calls for more than 20% growth in 2020 and a 10% annual compounded annual growth rate through 2023 as we see solar power entering a secular growth phase, driven by costs as opposed to policy. In particular, we favor names with potential for earnings power inflection and/or idiosyncratic, new product driven upside against this growth backdrop.

These four top stocks are rated Buy, and they all have massive upside to their Goldman Sachs price targets.

First Solar

This top company is a top pick for 2020 and on the Goldman Sachs Conviction List of favorite stocks to buy. First Solar Inc. (NASDAQ: FSLR | FSLR Price Prediction) is the largest vertically integrated solar manufacturer in the United States. The company uses a specialized cadmium telluride (thin film) based panel, which is different from most other panels, which are silicon based. First Solar engages in manufacturing and has planned 6 GW of capacity by 2020, with revenues increasingly coming from module sales.

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First Solar also develops and sells downstream solar projects and has created some of the largest solar installations in the country. While there have been some trade-related concerns, solid earnings should keep a nice tailwind behind the shares. With systems business and module guidance very achievable, this is perhaps the strongest player in the industry.

Goldman Sachs has a strong $81 price objective for the shares, which compares with a lower consensus price target on Wall Street of $70.91. The stock was last seen on Tuesday trading at $58.78 per share.

Enphase Energy

While it is somewhat off the radar, this is another top pick at Goldman Sachs for 2020. Enphase Energy Inc. (NASDAQ: ENPH) is a global energy technology company that delivers smart, easy-to-use solutions that connect solar generation, storage and management on one intelligent platform.

The company revolutionized solar with its microinverter technology and produces the world’s only truly integrated solar plus storage solution. Enphase has shipped more than 23 million microinverters, and approximately a million Enphase-based systems have been deployed in 130 countries.

Enphase Energy recently announced that Solair, a commercial solar installation and green energy consulting firm based in Delaware, is deploying the company’s microinverters on commercial solar projects to precisely right-size systems for financial incentives and interconnection requirements, improve installation time and issue production guarantees with confidence.

The Goldman Sachs team loves the secular growth story on battery storage and the European exposure, and have set a $34 price target. The posted consensus target was last seen at $31, and the last trade on Tuesday came in at $30.20.

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Analysts believe this top company is gaining market share and is an emerging growth story. Sunrun Inc. (NASDAQ: RUN) finances, installs and services solar power arrays on customer premises. The company acquires customers directly, as well as through a partnership model.

The majority of the company’s solar installations are leased from Sunrun by its customers, with a smaller portion of the business comprised of systems sold to customers outright.

Sunrun has experienced an increase in hedge fund interest of late. The stock was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds holding shares at the end of the previous quarter. The Goldman Sachs analysts cite the easing comparisons and the reacceleration in growth potential. Plus, the company is a battery leader among installers.

The $19 Goldman Sachs price target compares to the higher consensus target of $20.40. The shares closed most recently at $15.27 a share.

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SunPower

This stock has been blasted and could have the biggest upside potential among the Goldman Sachs favorites. SunPower Corp. (NASDAQ: SPWR) designs, manufactures and delivers solar systems to residential, commercial and power plant customers worldwide. The company provides solar power components, including panels and other system components. French energy giant Total owns a 57% stake in the company.

The company also offers operations and maintenance services, including remote monitoring, and preventative and corrective maintenance services, as well as rapid-response outage restoration services. Further, it leases solar power systems to residential customers and sells inverters manufactured by third parties. The company serves investors, financial institutions, project developers, electric utilities, independent power producers, commercial and governmental entities, production home builders, residential owners and small commercial building owners.

The analysts cite an execution story that combines improving cash flow, an attractive sum-of-the-parts valuation and a spin-off catalyst.

Goldman Sachs has set at a massive $12 price target on the stock. The consensus target is just $8.96, and the stock closed at $8.65 a share on Tuesday.

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The technological advances in the industry combined with a very positive attitude globally for clean energy alternatives make these stock stellar additions for aggressive growth portfolios. They can be volatile, so it may make sense to scale capital in and see how fourth-quarter results come in.