As part of the Earth Day celebration, President Joe Biden announced a seven billion dollar investment in solar energy, which could send solar-related stocks through the roof. His surprise announcement on renewable energy includes plans to provide residential solar projects for over 900,000 households. The important detail for investors is that this could lead directly to powerful opportunities in the solar panel production sector.
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The Solar Power Industry
Biden’s announcement, or more specifically, the follow-up actions on this directive regarding solar power, could have a huge impact on key players in the industry. Solar energy is already on track to fulfill a much greater portion of the world’s energy production in just a few short years. For example, cumulative photovoltaic (PV) capacity is forecasted to nearly triple and exceed the output of natural gas by 2026 and coal by 2027.
Today, publicly traded solar companies fall into the category of growth stocks. This typically results in greater price fluctuations for investors and the possibility of larger-than-average gains or losses compared to the overall market.
Analysts Are Bullish on These Solar Stocks
Analysts are bullish on three solar-related stocks, which include NEXTracker (NASDAQ:NXT), First Solar (NASDAQ:FSLR), and Shoals Technologies Group (NASDAQ:SHLS).
Looking at each of them independently, Nextracker Inc. provides solar tracking solutions. Nextracker’s recent financial results show a 38% year-over-year increase in revenue, attributed to the growing demand for their solar tracking systems.
Then there is First Solar Inc., a leading manufacturer of solar panels and provider of utility-scale PV power plants and related services. The company is poised to play a crucial role in the transition to renewable energy.
Lastly, Shoals Technologies Group Inc. is a major provider of electrical balance of system (EBOS) solutions for solar panels, which are components in a solar power system not directly related to the solar panels themselves.
According to the TipRanks Comparison Tool, each of them have a Strong Buy rating. In particular, the largest upside potential is observed in SHLS stock, with an average SHLS price target of $18.57, which implies an upside potential of 121%. If bullish growth predictions for the sector materialize, these stocks could outperform others.
How Biden’s Plan Brightens Solar’s Outlook
The key players in the solar power industry may find the outlook for their companies brighter after President Biden’s Earth Day announcement. A $7 billion injection into the demand side of the solar energy field will undoubtedly ramp up sales for solar panels and related products, leading to higher sales and revenue for these and other related companies. The initiative is also projected to create 200,000 jobs, fostering growth in the solar field and increasing output capacity and related employment within the solar power industry.
Key Takeaway
In summary, injecting an extra $7 billion into an industry dominated by smaller growth companies is expected to significantly affect their financial performance. As profitability climbs, stock prices can be expected to adjust upwards. Investors may find an opportunity to capitalize on this as the President finalizes the deal with his Earth Day pledge.
