One segment that has been absolutely mauled over the past year or so is alternative energy, and pessimism still lingers despite the fact that many are positive about the prospects for global solar and residential solar demand. There is good reason for the positive vibes, as 2016 may turn out to be the hottest year on record.

In a new Baird research report, while the analysts are positive on alternative energy as a whole, they are very selective on the stocks they like and focus on two top companies. With the stocks having been beaten down so hard, downside looks minimal, and both are solid additions to aggressive growth portfolios.

SunPower

This is one of the two companies that the Baird team likes now. 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. It also offers commercial rooftop and ground-mounted solar power systems, residential mounting systems and power plant systems, as well as utility-scale photovoltaic (PV) power plants.

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 it 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 Baird team notes that, with the stock down a massive 65% from highs the company printed in the summer of 2014, the valuation is extremely attractive at current levels. Toss in the fact that almost 40% of the float is sold short, and almost any positive earnings or corporate news could send shares dramatically higher. They also say to buy the stock in front of the earnings report next week.

Baird is not the only Wall Street firm bullish on the stock. The analysts at Merrill Lynch also like it.

The Baird price target for the stock is a whopping $37, and the Wall Street consensus target is $30.04. The shares closed most recently at $14.55.

First Solar

This is another top stock that has been mauled since hitting highs back in March. First Solar Inc. (NASDAQ: FSLR) operates through two segments. The Components segment designs, manufactures and sells solar modules, such as CdTe modules that convert sunlight into electricity for project developers, system integrators and operators of photovoltaic (PV) solar power systems.

The Systems segment provides turnkey PV solar power systems or solar solutions, such as project development; engineering, procurement and construction; operating and maintenance; and project finance services to investor-owned utilities, independent power developers and producers, commercial and industrial companies, and PV solar power system owners.

The Baird team noted in its report:

We believe First Solar will meet earnings estimates, and believe there is an outside chance the company provides some visibility into 2017 given the CEO transition. Additionally, we believe bookings will be a focus, as well as indications about U.S. and international utility scale-project demand. We believe First Solar is undervalued at current levels, and recommend shares for long-term investors given the company’s strong balance sheet and continued technological advancements.

Baird has a $60 price target, though the consensus target is set at $67.13. The stock closed Tuesday at $47.76.

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While these stocks are both very aggressive, for investors that can tolerate a little volatility and can see the value at these incredibly low prices, they could have big upside potential.

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