We have heard for years how solar could actually become a large part of our energy production and use, and how the clean nature of it would help in reducing carbons in the atmosphere. The problem is that currently it is still hard to adopt on an individual basis. Tesla founder and CEO Elon Musk is working on a shingle that can be installed on roofs that could capture energy. Many feel that building integrated photovoltaics (BIPV) will be a huge part of the future.
A new and giant research report from Deutsche Bank points out that declining solar costs are driving growth. The report noted this:
Despite reaching grid parity, solar sector growth is still much dependent on utilities and government policies. We expect further cost reductions in solar and the emergence of low cost storage options to drive unconstrained solar growth in several markets starting from 2019-20 time frame. The transition will create significant investment opportunity for traditional clean energy investors. Further, we believe that forward-looking utilities will increasingly look to find opportunities to incorporate solar into their business models.
The analysts have three top picks, and all are rated Buy at Deutsche Bank.
First Solar
This top clean technology/solar company remains a sector leader. 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 potential for tariffs on crystalline silicon wafers could push up the price on the thin-film modules sold by the company. A 10% increase in the average selling price of the modules could easily push the company earnings higher in 2018.
The Deutsche Bank price target for the stock is a whopping $65, while that Wall Street consensus target is $53.58. The shares closed on Friday at $48.21 apiece.
Sunrun
Deutsche Bank thinks this top company is gaining market share. 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. Most 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.
Back in the summer, the company announced a partnership with Comcast as part of its marketing efforts to educate customers about the cost savings of residential solar. Sunrun has already doubled its addressable market, as the company’s products are now available in 22 states. With solar growth rates slowing, the company’s efforts to lower costs could boost sales.
Deutsche Bank has a massive $12 price target, and the consensus target is $10.38. The shares closed trading at $5.58 on Friday.
SolarEdge
This stock has had a strong run this year and looks poised to go even higher. SolarEdge Technologies Inc. (NASDAQ: SEDG) designs, develops and sells direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations in Israel, Europe, the United States and elsewhere. The company’s DC optimized inverter systems include power optimizers, inverters and cloud-based monitoring software. Its products are used in a range of solar market segments, including residential, commercial and small utility-scale solar installations.
SolarEdge sells its products directly to solar installers, as well as engineering, procurement and construction firms, and indirectly to solar installers through distributors and electrical equipment wholesalers, as well as PV module manufacturers.
The $30 Deutsche Bank price objective may go higher. It compares with the consensus estimate of $27.27. The shares closed Friday at $28.81.
The clean technology world has matured in a big way over the past 20 years, and innovation in products and solar storage will continue to push market share gains. All these stocks are best suited for aggressive growth accounts.
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