Shares of solar names are under pressure on Wednesday following Donald Trump’s presidential win last night. Deutsche Bank Trump’s win and the Republicans retaking the Senate will likely lead to the scaling back of certain incentives, thus dampening sentiment on the solar industry. Meanwhile, Roth MKM says that the selloff in the solar space is creating buying opportunities for quality companies, such as First Solar (FSLR) and Nextracker (NXT).
IMPACT TO SOLAR: Deutsche Bank believes Donald Trump’s win and the Republicans retaking the Senate will likely lead to the scaling back of certain incentives, thus dampening sentiment on the solar industry. With a Republican Presidential and Senate win, the firm sees some risks of ITC incentives either being removed or scaled back more quickly than previously expected. Deutsche would not be surprised to see the various “adders” to the current 30% ITC be removed. “Those adders include low-income adder (10%), energy community (10%), low-income community (10%), and domestic content (10%),” the firm tells investors. Deutsche views the last one as the most likely to be kept under a Trump administration, given its elements of U.S. protectionism.
The firm expects the solar space to experience downward pressure and high volatility through the coming days, with the most meaningful impact on Sunnova Energy (NOVA) and Sunrun (RUN). It sees a less significant, though still negative, impact on Enphase Energy (ENPH) and SolarEdge (SEDG). While Deutsche expects First Solar to trade with the sector in the short-term, it believes the company is largely insulated from these headwinds over the medium-term. A Trump administration will likely maintain or increase current tariffs, which could be beneficial for First Solar, the firm tells investors in a research note.
Overall, the firm believes that with a Republican President and Senate, the situation is “likely to be less positive,” and thinks the government focus could shift towards protecting fossil-fuel-based energy.
BUYING OPPORTUNITIES: Following Trump’s presidential win last night, Roth MKM analyst Philip Shen says that phasing out the ITC/PTC earlier is likely very much on the table, which is a negative for the solar sector as it likely lowers demand for the companies in the firm’s coverage universe. A DC lawyer shared, the Republicans “plan a whole series of tax cuts and have to pay for it somehow.” Roth notes that its work over the past few months suggested that the 45X should be safe. Its checks today continue to support this view, which is a positive for First Solar and others benefiting from 45X. Additionally, Mike Johnson, the GOP Speaker of the House, highlighted that they would approach changes to the IRA with a “scalpel” rather than a sledgehammer, the firm adds. With many solar stocks down, Roth recommends buying the dip opportunistically. The firm would put First Solar in that bucket along with Nextracker.
PRICE ACTION: In afternoon trading, shares of SolarEdge have plunged over 19% to $15.22, Sunnova has slid about 52% to $3.42, Sunrun has slipped more than 29% to $11.96, Enphase has dropped almost 16% to $75.93, First Solar has slid more than 9% to $196.39, and Nextracker has slipped about 7% to $41.18.
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