Solar stocks shined as bright in the past 12 months despite a continuing shift to renewable energy and lucrative government incentives to install solar infrastructure. Disrupted supply chains, rising interest rates, and policy uncertainty have been among the challenges solar faces. The sector’s largest exchange-traded fund (ETF) by assets under management, the Invesco Solar ETF (TAN), has shed 4𓄧3% over the past year. By comparison, the large-ไcapitalization Russell 1000 Index has gained almost 15%.

Below, we review the top three solar stocks with the best value, the fastest growth, and the most momentum. All figures are as of Nov. 24, 2023.

Best Value Solar Stocks

The solar stocks below have the lowest 12-month trailing 澳洲幸运5官方开奖结果体彩网:price-to-earnings (P/E) ratio. This measures a company’s stock price relative to its earnings per share (EPS), supplying a metric for how much investors are willing t🍌o pay for each dollar of earnings generated. By comparing P/E ratios within the solar sector and against broader market benchmarks, investors can gauge the relative attracti📖veness of solar stocks for investing.

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• Daqo New Energy Corp.: This China-based firm manufactures ultrapure polysilicon for solar cells, modules, ingots, and wafers.
• JinkoSolar Holding Co.: This firm produces photovoltaic products, including solar modules, silicon wafers, solar cells, recovered silicon materials, and silicon ingots. JinkoSolar's key customers include solar developers; engineering, procurement, and construction companies; and residential customers.
• Canadian Solar Inc.: This company specializes in photovoltaic technology and project development. Its customers include utilities, commercial and industrial firms, and residential users. The company develops, makes, and sells solar ingots, wafers, cells, modules, and other solar power and battery products. The company's third-quarter earnings report revealed a 39% drop in net income from the previous year as it faced challenging market conditions.

Fastest-Growing Solar Stocks

The table below presents the top three solar stocks using a growth model that scores companies based on a 50/50 weighting of their most recent quarterly 澳洲幸运5官方开奖结果体彩网:year-over-year (YOY) revenue growth and the most recent quarter’s YOY EPS growth as percentages. Employing both metrics better indicates a company’s overall financial 🅠position and growth prospects.

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• SolarEdge Technologies Inc.: The firm makes and sells solar ingots, wafers, cells, modules, and other solar power and battery storage products globally. Its products are aimed at the residential, commercial, and utility-scale markets.
• JinkoSolar Holding Co.: See the company description above.
• Shoals Technologies Group Inc.: The company provides electrical balance of systems or eBoS products for solar energy projects. It makes components such as combiner boxes, wiring harnesses, and junction boxes. Shoals reported third-quarter earnings that said total revenue grew by 48% year-over-year. Energy production, it said, has increased at several facilities, most notably its Tennessee plant.

Solar Stocks with the Most Momentum

The solar stocks below have delivered the highest total return over the past year. Typically, 澳洲幸运5官方开奖结果体彩网:momentum investors argue that stocks outperforming their sector peers should continue to offer superior returns since such changes are unlikely to be a bl🐠ip.

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• First Solar Inc.: The company makes and sells cadmium telluride solar modules that convert sunlight into electricity. First Solar's key customers include developers and operators of systems, utilities, independent power producers, and commercial and industrial companies.
• JinkoSolar Holding Co.: See the company description above.
• Array Technologies Inc.: The firm produces solar tracking systems for utility-scale projects, including products that attempt to optimize solar panel orientation, enhancing energy output. The company's third-quarter earnings report said its total revenue and net income dropped 32% and 43%, respectively, from last year. On the heels of this news, it announced a new chief financial officer Nov. 13, 2023.

Challenges in the Solar Industry

Despite sustained demand for photovoltaic modules, storm clouds have recently shadowed the solar industry. The Invesco Solar ETF, a key indicator of the sector’s performance, has shed 43% of its value, marking a downtrend that began in August 2022. This decline reflects numerous and complex factors in this renewable energy sector:

• Declining prices: The sector has been grappling with declining prices due to oversupply, which has led to tighter profit margins and concerns over industry overcapacity.
  
• Interest rates: As elsewhere in the economy, rising interest rates, which have stabilized for now, have played a role, making financing more expensive and affecting investor sentiment.
• Lower polysilicon costs: Lower material costs are frequently a boon for manufacturers since they cut a major expense. Polysilicon is the primary raw material used to produce solar panels, and global spot prices for it declined about 70% earlier this year, reaching $8 per kilogram for the first time in three years. This caused global module prices to reach their lowest-ever point at $0.17 per watt produced due to oversupply, competition, decreasing module commodity prices (silver, aluminum, etc.), and a decline in the value of the Chinese yuan versus the dollar. However, this was not necessarily good for solar stocks since many solar companies had a good amount of polysilicon in inventory, which lost much of its value.
• Regulatory effects: Constraints on U.S. module imports have added another layer of complexity, limiting the availability of essential components for solar installations. Other recent policy changes have had a significant impact. For example, California’s new net-metering policy lowered financial incentives for solar energy users and increased the costs for owners of solar panels.
• Shifts in capital: Additionally, there’s been a noticeable shift in investment focus, with capital moving away from solar toward trending sectors like artificial intelligence.
• Supply chain issues: These were slower to resolve than other industries, exerting downward pressure on solar stocks.
  

Advantages of Investing in Solar Stocks

Growing investments in renewal energy: Billions in investments from the U.S. federal government aim to make the use of solar more universal for energy needs. In 2018, another dollar went to renewable energy sources for every dollar invested in fossil fuel production. As of 2023, that ratio is now one dollar on fossil fuels for every $1.70 spent on clean energy. This reduces energy producers' most significant costs, namely those for the infrastructure that makes it possible. The sun's energy, of course, has no cost, so this should mean reduced costs for solar production firms. As those expenses go lower, the cost of solar energy should become more competitive with other energy sources, lowering the price consumers pay for each watt of power.

Growing renewable energy demand: Solar stocks should benefit from increasing global demand for renewable energy sources. Growing investment and demand for solar energy translates directly into increased demand for solar technology and infrastructure, bolstering the prospects of companies within the sector.

Decreasing costs and technological advances: Solar stocks stand to benefit from solar technology cost reductions and new technological advances in the sector. The U.S. Department of Energy continues with plans to reduce the cost of solar energy by 60% by 2030. The drop in global polysilicon spot prices should mean reduced costs for solar panel manufacturers, increase their overall profitability, and improve their ability to compete with other forms of energy generation as the cost per watt produced goes down.

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As of the date this article was written, the author does not own any of the above stocks or ETFs.