In this article, we discuss the 10 best solar energy stocks to buy for 2022.
Solar energy has become quite popular due to rising concerns about climate change, advocacy for green energy, and governments offering stimulus packages and subsidizing sustainable energy sources. Solar energy, being clean, emissions-free, and renewable, has experienced an average annual growth rate of 42% in the last decade.
Wind and solar capacity additions of 13.8 gigawatts in the first eight months of 2021 were up 28% year-over-year. The Biden administration’s aim to fully decarbonize the US economy is fueling the growth of the renewable sector, which will be more rapid if proposed legislation is enacted.
In 2020, 43% of all new electric capacity added to the grid came from solar, and this has been the largest share of newly added solar capacity in history, for the second year in a row. Solar energy companies are poised for higher demand in the coming years, especially as price volatility in the oil and gas sectors renders those sources as extremely expensive for industrial purposes, in addition to the excessive carbon footprint.
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Some of the notable solar energy stocks include First Solar, Inc. (NASDAQ:FSLR), Sunnova Energy International Inc. (NYSE:NOVA), Sunrun Inc. (NASDAQ:RUN), and Enphase Energy, Inc. (NASDAQ:ENPH), among others discussed in detail below.
Our Methodology
We compiled the list of the best solar energy stocks to buy for 2022 by choosing companies that were popular among hedge funds, had positive analyst ratings and long-term growth catalysts.
The list is ranked according to the hedge fund sentiment surrounding each stock, which was gauged from a total of 867 hedge funds monitored by Insider Monkey in the third quarter.
Best Solar Energy Stocks to Buy for 2022
10. Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN)
Number of Hedge Fund Holders: 9
Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) became an independent company in 2020, after its spin-off from the California-based SunPower Corporation (NASDAQ:SPWR). Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) manufactures and distributes solar products across 100 countries via extensive retail channels, operating the SunPower brand in all global markets except the United States and Canada.
On November 17, Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) announced earnings for Q3. The company reported a loss per share of $1.34, beating estimates by $0.01. The revenue increased 6.71% year-over-year to $220.49 million, but missed estimates by $5.78 million.
BofA analyst Julien Dumoulin-Smith on December 3 upgraded Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) to Buy from Neutral with a $23 price target, stating that Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) could qualify for tax credits of 11 cents per watt with its proposed U.S. cell and module manufacturing facility.
By the end of September this year, 9 hedge funds were bullish on Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN), holding total stakes valued at $10.70 million. This is an increase as compared to 8 funds holding positions in Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) in the preceding quarter.
One of the leading stakeholders of the company is Israel Englander’s Millennium Management, holding 121,720 shares worth $2.14 million. Englander increased his stake in Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) by 524% in the third quarter.
In addition to First Solar, Inc. (NASDAQ:FSLR), Sunnova Energy International Inc. (NYSE:NOVA), Sunrun Inc. (NASDAQ:RUN), and Enphase Energy, Inc. (NASDAQ:ENPH), Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) is one of the best solar energy stocks to buy for 2022.
9. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 10
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is a Chinese company that is currently the world’s largest solar panel manufacturer. JinkoSolar Holding Co., Ltd. (NYSE:JKS) serves the residential, industrial, and commercial utility sectors in China, the United States, Japan, Germany, the United Kingdom, Brazil, the United Arab Emirates, Italy, Spain, and France, among other regions, making it one of the best solar stocks to buy for 2022. JinkoSolar Holding Co., Ltd. (NYSE:JKS) is a producer of mono wafers, solar cells, and solar modules.
JinkoSolar Holding Co., Ltd. (NYSE:JKS) posted its Q3 results on November 30. EPS in the quarter totaled $0.05, exceeding estimates by $0.03. The Q3 revenue came in at $1.33 billion, missing estimates by $62.37 million.
CICC analyst Tao Zeng upgraded JinkoSolar Holding Co., Ltd. (NYSE:JKS) to Outperform from Market Perform with a $66.10 price target on December 2.
JinkoSolar Holding Co., Ltd. (NYSE:JKS), on December 2, announced that its principal operating subsidiary, Jinko Solar, will reinforce its partnership for 2022 with Aldo Solar, which is the largest distributor of solar energy solutions in Brazil. This resulted in the signing of the largest distribution agreement by JinkoSolar Holding Co., Ltd. (NYSE:JKS) outside China, where modules of 2 gigawatts of installed power will be distributed.
Marshall Wallace LLP is one of the leading JinkoSolar Holding Co., Ltd. (NYSE:JKS) stakeholders from the third quarter, holding a $12.99 million stake in the company. Overall, 10 hedge funds were long JinkoSolar Holding Co., Ltd. (NYSE:JKS) in Q3, up from 7 funds in the preceding quarter.
8. Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI)
Number of Hedge Fund Holders: 15
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) is a Maryland-based company that deploys investments in solar energy projects and sustainable infrastructure that aids energy efficiency improvements such as heating, ventilation, air conditioning systems, lighting, energy controls, roofs, and building shells.
On November 30, B. Riley analyst Christopher Souther raised the price target on Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) to $83 from $82 and kept a Buy rating on the shares. The analyst is “increasingly confident” in the pace of the company’s balance sheet growth by the end of 2021, and expects visibility for net investment income growth of over 20% in 2022. He states that the recent pullback on the stock is a buying opportunity. This makes Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) one of the best solar energy stocks heading into 2022.
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) reported Q3 earnings on November 4, posting an EPS of $0.41, in line with analysts’ consensus estimates.
Ian Simm’s Impax Asset Management is the leading stakeholder of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) from the third quarter, owning 2.18 million shares of the company worth $116.66 million. Overall, 15 hedge funds were bullish on the stock in Q3, up from 10 funds in the preceding quarter.
7. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 17
Headquartered in Toronto, Brookfield Renewable Partners L.P. (NYSE:BEP) owns and operates renewable power assets. The company is backed by Brookfield Asset Management Inc. (NYSE:BAM). Brookfield Renewable Partners L.P. (NYSE:BEP)’s portfolio of assets consists of hydroelectric, wind, solar, and storage facilities in North America, South America, Europe, and Asia.
On December 9, Brookfield Renewable Partners L.P. (NYSE:BEP) was upgraded to Overweight from Neutral by JPMorgan analyst Mark Strouse, with a $46 price target. The analyst believes that Brookfield Renewable Partners L.P. (NYSE:BEP) is “best in class” in the development and ownership of renewable projects, offering “high-quality cash yield and good visibility into growth”.
The stock should appeal to investors seeking exposure to ESG, energy, and technology, as well as value investors seeking long-term exposure to the renewable energy sector.
Robert Joseph Caruso’s Select Equity Group recently added Brookfield Renewable Partners L.P. (NYSE:BEP) to its Q3 portfolio, and is the leading company stakeholder, with a $2.67 million position. Overall, 17 hedge funds were long Brookfield Renewable Partners L.P. (NYSE:BEP) in the third quarter, with total stakes valued at $145.1 million.
Clearbridge Investments mentioned Brookfield Renewable Partners L.P. (NYSE:BEP) in its Q1 2021 investor letter. Here is what the firm said:
“U.S. renewables utility Brookfield Renewable was another detractor. Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada and domiciled in the U.S., focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi-technology renewables business makes it an attractive partner. Its development pipeline stands at 18,000 megawatts, providing confidence the company can meet its targeted double-digit cash flow growth through to 2025. Shares moderated amid expectations of rising bond yields, and a cool-off on the green trade.”
6. Daqo New Energy Corp. (NYSE:DQ)
Number of Hedge Fund Holders: 18
Daqo New Energy Corp. (NYSE:DQ) made it to our list of the best energy stocks for 2022, announcing solid Q3 results on October 28. The company posted an EPS of $3.84, beating estimates by $1.19. Revenue over the period jumped 366.65% to $585.78 million, exceeding estimates by $37.55 million.
Daqo New Energy Corp. (NYSE:DQ) is a Chinese company specializing in the development and distribution of monocrystalline silicon and high-purity polysilicon, primarily for the global solar photovoltaic industry.
On November 1, Roth Capital analyst Philip Shen raised the price target on Daqo New Energy Corp. (NYSE:DQ) to $79 from $52 and kept a Neutral rating on the shares after the company’s Q3 earnings beat, and reiterated 2021 production guidance. According to the analyst, Daqo New Energy Corp. (NYSE:DQ) will experience higher earnings in 2022 as a result of the upward trend in poly average selling prices.
Of the 18 hedge funds that were bullish on Daqo New Energy Corp. (NYSE:DQ) in the third quarter, Steve Cohen’s Point72 Asset Management is one of the leading stakeholders of the company, owning 421,479 shares worth $24 million.
In addition to First Solar, Inc. (NASDAQ:FSLR), Sunnova Energy International Inc. (NYSE:NOVA), Sunrun Inc. (NASDAQ:RUN), and Enphase Energy, Inc. (NASDAQ:ENPH), Daqo New Energy Corp. (NYSE:DQ) is a notable solar energy stock.
5. ReNew Energy Global plc (NASDAQ:RNW)
Number of Hedge Fund Holders: 24
ReNew Energy Global plc (NASDAQ:RNW), on November 18, announced its FQ2 2022 results, posting an EPS of $0.27, beating estimates by $0.22. Revenue over the period equaled $287.62 million, outperforming estimates by $27.41 million.
With a renewable asset base of 10.2 gigawatts, ReNew Energy Global plc (NASDAQ:RNW) is a leading Indian independent power producer that is working towards global green energy transformation. ReNew Energy Global plc (NASDAQ:RNW)’s solar products are used widely by the country’s consumer goods, government, education, manufacturing, and retail sectors, among others.
Goldman Sachs analyst Vinit Joshi on December 6 initiated coverage of ReNew Energy Global plc (NASDAQ:RNW) with a Buy rating and a $17 price target. The analyst stated that ReNew Energy Global plc (NASDAQ:RNW) is India’s largest renewables developer by installed capacity, with a top 10 positioning globally. The upside drivers for ReNew Energy Global plc (NASDAQ:RNW) include tripling of the installed capacity base, double digit equity IRR over FY22-FY24, and differentiated exposure to renewable power projects with low competition, making it one of the best solar energy stocks to buy for 2022.
In the third quarter, Daniel Patrick Gibson’s Sylebra Capital Management was the leading stakeholder of the company, with ReNew Energy Global plc (NASDAQ:RNW) being a new addition in the hedge fund’s portfolio. Sylebra Capital Management owns 5.54 million shares of ReNew Energy Global plc (NASDAQ:RNW), worth $56.5 million. Overall, 24 funds were bullish on ReNew Energy Global plc (NASDAQ:RNW) in Q3, with total stakes valued at $286.9 million.
4. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 27
Sunnova Energy International Inc. (NYSE:NOVA), an American provider of solar solutions to residential customers, announced earnings for the third quarter on October 27. The company posted a loss per share of $0.23, missing estimates by $0.06. Revenue over the period jumped 37.32% year-over-year to $68.9 million, exceeding estimates by $1.41 million.
Riley analyst Christopher Souther on October 29 raised the price target on Sunnova Energy International Inc. (NYSE:NOVA) to $54 from $52 and kept a Buy rating on the shares after the “solid” Q3 results. The analyst observed that Sunnova Energy International Inc. (NYSE:NOVA)’s “demonstrated execution and bolstered balance sheet positions it well to meet or exceed its 2022+ goals.” He considers the stock to be the best way to invest in the residential solar sector heading into 2022.
By September end, 27 hedge funds were long Sunnova Energy International Inc. (NYSE:NOVA), up from 25 funds in the previous quarter. Jos Shaver’s Electron Capital Partners is the leading Sunnova Energy International Inc. (NYSE:NOVA) stakeholder from Q3 2021, holding a $48.55 million stake.
3. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 31
GLJ Research analyst Gordon Johnson on November 23 raised the price target on First Solar, Inc. (NASDAQ:FSLR) to $152.87 from $104.41 and kept a Buy rating on the shares. The analyst stated that the Biden Administration’s $1.9 trillion Build Back Better legislation offers a “very generous handout” to U.S. solar manufacturers like First Solar, Inc. (NASDAQ:FSLR), and the company is positioned to take advantage of an approximately 50% taxpayer subsidy on the production of 6 gigawatts solar capacity annually.
Headquartered in Arizona, First Solar, Inc. (NASDAQ:FSLR) is an American company providing solar panels, utility-scale PV power plants, and support services including construction, maintenance, and panel recycling.
Michael Cowley’s Sandbar Asset Management is one of the leading First Solar, Inc. (NASDAQ:FSLR) stakeholders, increasing its stake in the company by 7% in the third quarter, holding 365,470 shares worth $34.8 million. Overall, 31 hedge funds in the Q3 database of Insider Monkey reported owning stakes in First Solar, Inc. (NASDAQ:FSLR), valued at $266.5 million.
Here is what GDS Investments has to say about First Solar, Inc. (NASDAQ:FSLR) in their Q4 2020 investor letter:
“First Solar recently announced blowout results for its last fiscal quarter with earnings and revenues handily beating estimates. The Biden Administration should only accelerate the inevitable shift away from fossil fuels toward renewable energy as the costs associated with solar energy production reach parity with coal and oil production. As the following chart by the International Energy Agency makes clear, demand for oil should plateau in the 2030’s and, by the 2040’s, would account for less than 20% of global energy consumption.”
2. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 37
A California-based provider of residential solar panels and home batteries, Sunrun Inc. (NASDAQ:RUN) is one of the most popular solar energy stocks among hedge funds in the third quarter. According to the Q3 database of Insider Monkey that tracks the movement of 867 elite hedge funds, 37 funds were bullish on Sunrun Inc. (NASDAQ:RUN), with the total stake value amounting to $1.67 billion.
Philippe Laffont’s Coatue Management is the biggest Sunrun Inc. (NASDAQ:RUN) stakeholder from the third quarter, with 9.5 million shares worth $418.3 million.
On November 4, Sunrun Inc. (NASDAQ:RUN) announced its Q3 results, posting a $0.11 EPS, beating estimates by $0.09. The quarterly revenue jumped 109.17% from the prior-year quarter, amounting to $438.77 million, outperforming estimates by $25.03 million.
BMO Capital analyst Ameet Thakkar on November 5 raised the price target on Sunrun Inc. (NASDAQ:RUN) to $72 from $65 and kept an Outperform rating on the shares.
Here is what Horizon Kinetics has to say about Sunrun Inc. (NASDAQ:RUN) in its Q2 2021 investor letter:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.
You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.
In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.
In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).
1. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 52
Enphase Energy, Inc. (NASDAQ:ENPH) ranks first on our list of the best solar energy stocks to buy for 2022, with Wells Fargo analyst Michael Blum on November 22 initiating coverage of Enphase Energy, Inc. (NASDAQ:ENPH) with an Overweight rating and a $313 price target.
The analyst stated that Enphase Energy, Inc. (NASDAQ:ENPH) “stands to benefit from a number of long-term tailwinds” in the solar market, like the continued expansion of the residential and commercial solar demand, higher battery attach rates over time, and the decentralization of energy production.
Enphase Energy, Inc. (NASDAQ:ENPH) is a California-based clean energy technology company offering solar solutions and home energy storage.
On October 26, Enphase Energy, Inc. (NASDAQ:ENPH) posted its Q3 earnings. EPS in the quarter totaled $0.60, beating estimates by $0.11. The revenue came in at $351.52 million, up 96.93% year-over-year, outperforming estimates by $7.60 million.
Bruce Emery’s Greenvale Capital is one of the biggest Enphase Energy, Inc. (NASDAQ:ENPH) stakeholders from Q3, holding an $85.4 million stake in the company. Overall, 52 hedge funds in the third quarter were long Enphase Energy, Inc. (NASDAQ:ENPH), up from 44 funds in the preceding quarter.
Here is what ClearBridge Investments has to say about Enphase Energy, Inc. (NASDAQ:ENPH) in its Q2 2021 investor letter:
“Also in the solar space, we initiated a position in Enphase Energy (classified in the IT sector), which designs and manufactures microinverters for residential and small commercial solar photovoltaic (PV) systems. Enphase was the first company to commercialize microinverters for residential and small commercial solar PV systems. A microinverter, a type of MLPE, is a small inverter placed directly on the back of each solar module, as opposed to the traditional system of one string inverter on the side of the building.”
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Disclosure: None. 10 Best Solar Energy Stocks to Buy for 2022 is originally published on Insider Monkey.
