In this article, we discuss the 5 best solar energy stocks to buy for 2022. If you want our detailed analysis of these stocks, go directly to the 10 Best Solar Energy Stocks to Buy for 2022.
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.”
You can also take a look at 10 Best Fintech Stocks To Buy Now and 10 Cheap Stocks to Buy Before Christmas.
