In this article, we discuss the 10 cheap solar stocks to buy.
The renewable energy market, including solar energy, is growing at a rapid pace as countries are trying to reach the net-zero emissions target by 2050. The net-zero target coalition was initiated by the United Nations to protect the planet from the adverse effects of climate change.
According to Allied Market Research, the global renewable energy market size is expected to reach $1.977 trillion by 2030. On the other hand, Precedence Research expects that the solar energy market will grow from $197.23 billion in 2021 to $368.63 billion by 2030 at a CAGR of 7.2%. These figures indicate that the solar energy market is expected to cover 18.6% of the renewable energy market by 2030.
Solar Industry in the United States
In the last 10 years, the US solar market has experienced a growth rate of approximately 33%, reaching 130.9 gigawatts of solar capacity at the beginning of the year. This capacity is sufficient enough to power 23 million homes. In 2021, the industry was responsible for $33 billion of private investment in the United States.
In the third quarter of 2022, the solar capacity reached 135.7 gigawatts after adding 4.6 gigawatts in the quarter. In the first three quarters of 2022, 45% of all new electricity-generating capacity was solar. In the next decade, it is expected that the country’s solar capacity will increase by 4 times.
Solar Installation Incentives by the Government
The US government is allowing tax credits for installing solar power systems through the federal solar tax credit. The residential and commercial or industrial users that opted for solar power systems in 2021 and 2022 are eligible for a 26% tax credit. In August 2022, the solar tax credit policy was extended to 2034. Between 2022 and 2032, installing solar PV systems will make the consumers eligible for a 30% tax credit and will decrease to 26% and 22% in 2033 and 2034, respectively.
The Inflation Reduction Act signed in August 2022 by President Joe Biden included $369 billion to decarbonize the economy in an attempt to curb climate change. The act will allow US residents to receive a 30% tax credit for installing solar panels in their homes. Furthermore, according to the Biden administration, American families will be able to save $300 per year with their new solar power systems.
With inflation rising to its all-time high, investors are looking for attractive entry points in cheap stocks. When it comes to the solar segment, Sunrun Inc. (NASDAQ:RUN), First Solar, Inc. (NASDAQ:FSLR), and Altus Power, Inc. (NYSE:AMPS) are some of the cheap solar companies that show a promising future.
Our Methodology
After assessing the solar stocks listed on NYSE and NASDAQ, we chose 10 companies for our list of cheap solar stocks. These companies aren’t necessarily cheap stocks according to their price-earnings ratios. We ranked these companies according to overall hedge fund sentiment towards each stock. Considering that hedge funds buy stocks that they think are likely to deliver superior returns in the future, the 10 solar stocks we highlighted in this article are cheap based on their return potential.
The hedge fund sentiment was used to list the cheap solar stocks in ascending order and it was taken from Insider Monkey’s database of 920 elite hedge funds.
10 Cheap Solar Stocks To Buy
10. ReneSola Ltd (NYSE:SOL)
Number of Hedge Fund Holders: 5
ReneSola Ltd (NYSE:SOL) is a micro-cap solar company headquartered in Connecticut. As of that price on December 19, the company is trading at a price that is 93% lower than the IPO price. Nonetheless, the company’s recent shift to the European market has proven positive for the business. Europe has been facing energy shortages since the beginning of the Russia-Ukraine war.
As mentioned, due to the latest geographic shift, ReneSola Ltd (NYSE:SOL) generated revenue of $28.89 million, representing an increase of 85.5% YoY, outperforming the estimates of $6.33 million. The company reported a non-GAAP EPS of $0.05, compared to $0.01 forecasts. Moreover, ReneSola Ltd (NYSE:SOL) exited the quarter with cash and cash equivalents of $123 million.
On December 5, Northland analyst Donovan Schafer maintained an Outperform rating on ReneSola Ltd (NYSE:SOL)’s shares and raised the price target to $9.5 from $8. The analyst’s price target change reflected the “solid Q3 beat” by the company.
In the third quarter of 2022, 5 hedge funds held ReneSola Ltd (NYSE:SOL)’s shares, compared to 4 hedge funds in Q2.
Sunrun Inc. (NASDAQ:RUN), First Solar, Inc. (NASDAQ:FSLR), and Altus Power, Inc. (NYSE:AMPS) are some of the cheap solar stocks on our list along with ReneSola Ltd (NYSE:SOL).
9. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 15
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is a China-based solar panel manufacturer. The company serves commercial and residential customers across 160 countries. As of December 19, JinkoSolar Holding Co., Ltd. (NYSE:JKS)’s forward PE ratio stands at 8.45 which makes it an appreciably cheap solar stock.
JinkoSolar Holding Co., Ltd. (NYSE:JKS)’s low forward PE ratio of 16x and returns over the years make it a cheap growth stock. The company’s 3-year and 5-year revenue CAGR stands at around 35.3% and 22.5%, respectively. Additionally, in the September quarter, the company’s revenue represented a 106% YoY growth.
In the third quarter, 15 hedge funds had a stake in JinkoSolar Holding Co., Ltd. (NYSE:JKS), with a combined value of $182.65 million. Hillhouse Capital Management added an additional 14% to its position in the company and was the most prominent shareholder in JinkoSolar Holding Co., Ltd. (NYSE:JKS) with 1.29 million shares, worth $71.54 million.
8. Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN)
Number of Hedge Fund Holders: 17
Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) manufactures and sells solar power panels. It was a separate segment of SunPower Corporation (NASDAQ:SPWR) and was spun off to create a publicly traded company. As of December 19, Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) is trading 1% below its IPO price and over 60% below its all-time high.
Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) posted solid results in the third quarter of 2022. The company reported a loss per share of $1.09, outperforming the estimates by $0.47 and the revenues were up by 25% to $275.4 million. Furthermore, the company aims to be profitable by 2023, making it a cheap solar stock poised for growth.
Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) was tied to SunPower Corporation (NASDAQ:SPWR) through a distribution contract. However, the company will be able to expand directly from next year, giving it ample growth opportunities in the US.
On October 4, the EV company Aptera Motors named Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) as its supplier for solar cells. Aptera is yet to deliver its first vehicle and plans to do it by early 2023. Once it is up and running, it can prove to be an important revenue stream for Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN).
7. Daqo New Energy Corp. (NYSE:DQ)
Number of Hedge Fund Holders: 20
Daqo New Energy Corp. (NYSE:DQ) is a solar company that produces monocrystalline silicon and polysilicon for solar power systems. The company has headquarters in China and the Cayman Islands. As of December 19, Daqo New Energy Corp. (NYSE:DQ) is trading at an advantageously cheap valuation with a PE ratio of 2.12. The company stock has a price of $44.90 at the time of writing, compared to the book value of $55.67 per share in the third quarter.
In the third quarter, Daqo New Energy Corp. (NYSE:DQ)’s hedge fund sentiment reached an all-time high with 20 hedge funds holding a position in the company. Hillhouse Capital Management was the largest stakeholder with 2.1 million shares worth $111.538 million followed by Tairen Capital which increased its holdings in the company by almost 200% in the quarter. Tairen Capital held 1.9 million Daqo New Energy Corp. (NYSE:DQ) shares, worth $102.414 million.
Daqo New Energy Corp. (NYSE:DQ) is focusing on an aggressive expansion of polysilicon production after it announced a $3.4 billion investment toward its new production plant in Mongolia. The plant will reach an annual capacity of 332,000 metric tons of production by 2024 and the expansion will take place in two phases. According to the company’s outlook, Daqo New Energy Corp. (NYSE:DQ) is expected to produce 132,000 metric tons of output by the end of 2022.
6. Shoals Technologies Group, Inc. (NASDAQ:SHLS)
Number of Hedge Fund Holders: 21
Shoals Technologies Group, Inc. (NASDAQ:SHLS) manufactures electrical balance system products for solar projects. The company operates across the US and is headquartered in Tennessee. The company also focuses on EV charging infrastructure.
After the 2022 Q3 beat, Shoals Technologies Group, Inc. (NASDAQ:SHLS) recorded a 22%, 37%, and 31% CAGR growth in 2019, 2020, and 2021, respectively. Due to regulatory policies related to renewable projects, the growth is expected to be slower for Shoals Technologies Group, Inc. (NASDAQ:SHLS). However, the world’s net-zero target leaves significant room for growth for the company. As of December 19, the company is trading at 25% below its IPO price and 40% below its all-time high.
On December 8, JPMorgan analyst Mark Strouse reaffirmed a Buy rating on Shoals Technologies Group, Inc. (NASDAQ:SHLS)’s stock and raised the price target to $36 from $35 after meeting with the company management.
Some of the cheap solar stocks are Sunrun Inc. (NASDAQ:RUN), First Solar, Inc. (NASDAQ:FSLR), Altus Power, Inc. (NYSE:AMPS), and Shoals Technologies Group, Inc. (NASDAQ:SHLS).
ClearBridge Investments made the following comment about Shoals Technologies Group, Inc. (NASDAQ:SHLS) in its Q3 2022 investor letter:
“Shoals Technologies Group, Inc. (NASDAQ:SHLS) manufactures electrical balance of systems (EBOS) components for ground-mounted solar projects and has been gaining market share for quality of service and price. Shoals is also starting to develop an EV charging infrastructure business. We previously owned Shoals and sold our position earlier this year as supply chain issues were negatively affecting margins. Improving supply chain dynamics should support the stock, and tax credits for clean energy production and investment in the IRA should further act as a tailwind for Shoals.”
5. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 25
Sunnova Energy International Inc. (NYSE:NOVA) is a Texas-based renewable energy company. Its products include solar power systems, battery energy storage systems, EV chargers, and generators. As of December 19, Sunnova Energy International Inc. (NYSE:NOVA) is a cheap solar stock that is trading at a PE ratio of 19.02, the lowest since June 2019.
On December 15, Citi analyst Ryan Levine assumed coverage of Sunnova Energy International Inc. (NYSE:NOVA) with a Buy rating and a $26 price target. According to the analyst, the company is well-positioned to take advantage of rising utility bills and the Inflation Reduction Act. In addition, Sunnova Energy International Inc. (NYSE:NOVA)’s risk/reward tradeoff seems positive.
Sunnova Energy International Inc. (NYSE:NOVA)’s hedge fund sentiment remained the same during the third and fourth quarters. However, hedge funds seem to be bullish on the stock as they added substantial additional holdings to their portfolio. In the third quarter, 25 hedge funds had a stake worth $294.403 million, compared to a combined stake of $171 million in the second quarter. Moore Global Investments increased its holdings in the stock by 140% in the third quarter and was the largest stakeholder in the company with 2.7 million shares, worth $60.538 million.
Here is what ClearBridge Investments had to say about Sunnova Energy International Inc. (NYSE:NOVA) in its Q3 2022 investor letter:
“Within the utilities sector, solar power and energy storage company Sunnova (NYSE:NOVA) saw its share price benefit from passage of the Inflation Reduction Act legislation, which includes an array of new and extended tax credits that should not only support but enhance the company’s long-term growth prospects.”
4. Array Technologies, Inc. (NASDAQ:ARRY)
Number of Hedge Fund Holders: 29
Array Technologies, Inc. (NASDAQ:ARRY) is an American company that provides solar tracking systems. Its products can track the ideal positions for solar panel systems to achieve maximum production. As of December 19, the company is trading significantly below its IPO price and has shown growth at a considerable pace in recent quarters, and made it to the top 4 in our list of cheap solar stocks.
Array Technologies, Inc. (NASDAQ:ARRY) outperformed its Q3 EPS estimates by 8 cents and reported a non-GAAP net income per share of 18 cents. The company generated a revenue of $515 million in the quarter, showing a 173% increase from Q3 2021. Moreover, Array Technologies, Inc. (NASDAQ:ARRY) management raised its FY 2022 outlook to the range of $1.5 billion to $1.6 billion, compared to the previous $1.3 to $1.5 billion.
Wells Fargo analyst Michael Blum initiated Array Technologies, Inc. (NASDAQ:ARRY)’s coverage on December 6 with an Overweight rating. The analyst’s price target was $26 and he noted that he expects a revenue CAGR of 10% due to the government policies in favor of net-zero targets.
3. Altus Power, Inc. (NYSE:AMPS)
Number of Hedge Fund Holders: 33
Altus Power, Inc. (NYSE:AMPS) is an American renewable energy products manufacturing company that includes photovoltaic solar energy generation and storage systems. The company experienced a recent sell-off in the market and has lost 38.48% of its stock price year-to-date. Altus Power, Inc. (NYSE:AMPS) has a TTM PE ratio of 12.42.
On November 14, JPMorgan analyst Mark Strouse upgraded Altus Power, Inc. (NYSE:AMPS)’s stock to Outperform from Neutral. However, the analyst’s price target remained unchanged at $10. In the last three months, the company has been covered by 5 analysts and 4 of them have a Buy or Outperform rating on the stock. Their average price target of $11.80 represents an approximately 80% upside for Altus Power, Inc. (NYSE:AMPS) at the time of writing on December 19.
In the third quarter, Altus Power, Inc. (NYSE:AMPS)’s hedge fund sentiment shot up substantially with 33 hedge funds taking a piece of the company’s total shares. In the previous quarter, 21 hedge funds had a stake in the company.
2. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 45
First Solar, Inc. (NASDAQ:FSLR) manufactures solar panels and provides solar farms. It is headquartered in Arizona. Furthermore, the company also provides maintenance and end-of-life- recycling services. As of December 19, the First Solar, Inc. (NASDAQ:FSLR) stock is trading at 49.61% below its all-time high.
First Solar, Inc. (NASDAQ:FSLR) is already up 76.98% year-to-date at the time of writing, yet Wall Street analysts remain bullish on the stock. Out of 18 analysts that have covered the stock, 12 analysts maintain a Buy or Overweight rating on First Solar, Inc. (NASDAQ:FSLR), while the rest of the 6 have a Hold rating. Their average price target of $174.80, represents approximately a 12% upside to the stock price of $156.77 on December 19.
First Solar, Inc. (NASDAQ:FSLR) became quite a famous stock among hedge funds in the third quarter of 2022. 45 hedge funds were bullish on the company in the September quarter and owned a combined stake of $703.697 million, compared to 26 hedge funds with a combined value of $189.14 million in Q2.
1. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 47
Sunrun Inc. (NASDAQ:RUN) is a California-based renewable energy company that makes it to the top of our list of cheap solar stocks. It offers solar power systems and battery energy storage products. The company serves approximately 760,000 customers across the United States.
Sunrun Inc. (NASDAQ:RUN) is trading at $27.22 as of December 19, which is almost 72% below its all-time high. However, the company has been growing at a significant pace over the years and still has room for growth. In Q3, the company outperformed its GAAP EPS estimates by $1.01 while the analysts were predicting a net loss of 5 cents per share. The revenue grew 44% year-over-year to $631.91 million. Moreover, the Net Subscriber Value reached $13,259 which is 67.62% over the previous quarter. In addition, Sunrun Inc. (NASDAQ:RUN)’s management expects the solar energy installed growth to be 25% more than 2021 levels.
In the last three months, Sunrun Inc. (NASDAQ:RUN) was covered by 15 analysts with 13 Buy or Overweight ratings. Their average price target of $47.87 represents an upside of 76% from the stock price as of December 19 market closing time.
In Q3, Orbis Investment Management was the most significant shareholder of Sunrun Inc. (NASDAQ:RUN) with 12.2 million shares, worth over $337 million.
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Disclosure. None. 10 Cheap Solar Stocks To Buy is originally published on Insider Monkey.
