We recently compiled a list of the 8 Best Wind Power and Solar Stocks to Buy. In this article, we are going to take a look at where First Solar, Inc. (NASDAQ:FSLR) stands against the other wind power and solar stocks.
It is arguably one of the best times to pursue investment opportunities around wind power and solar stocks as the United States moves to achieve 100% clean energy use by 2035 and reduce emissions by 50 to 52% by 2030. As the US advocates for various initiatives to help tackle the climate crisis and keep a 1.5 C limit on warming, the case for the best wind power and solar stocks to buy is becoming clear.
The US wind power and solar capacity were more significant than ever last year as part of the country’s long growth trend for renewable energy. A total of 425,235 gigawatts hours of electricity were generated from Wind power, accounting for more than 12% of the country’s grid. Wind power has been the country’s largest renewable energy source since 2019.
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On the other hand, solar energy accounted for less than 4% of all the US power generation, affirming plenty of room for growth in the coming years. Likewise, solar power generation is projected to grow by 75%, from 163 billion kWh in 2023 to 286 billion kWh by 2025. Wind power is projected to increase by 11%.
Nevertheless, clean energy stocks had one of the worst runs in 2023 as they posted an average annual return of -10.5%, slightly improving from an average return of -11% a year ago. The underperformance of 2022 was attributed to the high inflation levels that saw investors’ sentiments take a significant hit.
Likewise, the underperformance of wind and solar energy stocks persisted in 2023 owing to the rising interest rates as the US Federal Reserve tried to tame runaway inflation. Given that most solar and wind companies must rely on the debt markets to raise capital, most have faced significant challenges amid the high interest rate environment.
The situation was further exacerbated by supply chain problems amid difficulties obtaining renewable energy equipment like wind turbines and solar panels over the past two years. Matthew Donen, equity analyst at Morningstar, said:
“We see several challenges for participants in the wind energy sector. Wind turbine manufacturers have struggled to restore profitability from unprecedented cost inflation in 2021, and developers of wind projects have recorded billions in impairments due to higher equipment costs and an increase in interest rates.”
Fast forward, clean energy stocks are on the move as investors take note of their depressed valuations. The growing demand for wind and solar energy for use in electric vehicles, building heating, and use in industrial settings like data centers are some of the catalysts driving growth in the sector.
In the aftermath of the European Central Bank and the Bank of Canada cutting interest rates, the best wind power and solar stocks again started seeing increase in investor positioning.
However, there are growing concerns that clean energy companies could come under pressure amid uncertainty around the US presidential election. The prospect of Republicans taking over the Whitehouse and Congress, raises the prospects of tax credits under the Inflation Reduction Act (IRA) being affected.
Nevertheless equity analyst Donen believes it would be difficult for a Trump administration to get rid of all favorable tax policies that have bolstered sentiments around wind and solar stocks. Here’s what Donen said:
“We think it would be difficult for Trump to roll back favorable tax policy for renewable energy enjoyed from the 2022 Inflation Reduction Act. A Trump administration might be able to slow implementation of the Act, but that is unlikely to slow renewable energy growth in the short-run.”
With the world focused more than ever on combating the effects of global warming, including a shift from fossil fuels to clean energy, tremendous opportunities are cropping up. With the COP26 targeting net zero emissions by 2050, an investment of $4 trillion would be needed by 2030. This is one of the reasons investors should start paying attention to the best wind power and solar stocks to buy now, and let’s take a look at them now.
Our Methodology
To compile the list of the best wind power and solar stocks to buy, we scoured different solar and wind energy ETFs and picked 8 of the top companies with tremendous upside potential. Once we had consolidated the list, we ranked the stocks based on the number of hedge funds that owned it.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A solar panel farm with an orange sky illuminating the vast landscape.
First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Investors: 66
Stock Upside Potential: 30.26%
First Solar, Inc. (NASDAQ:FSLR) is one of the largest solar companies in the world, specializing in providing photovoltaic solar energy solutions. It manufactures and sells PV solar modules using thin semiconductor technology. It stands out as one of the best wind power and solar stocks to buy owing to its deep relations and long reach with investors in the clean energy sector.
First Solar, Inc. (NASDAQ:FSLR) was one of the few solar energy stocks that did not crash last year amid rising interest rates and changes in solar policy. Its resilience in the market underscores why it is one of the most sought-after stocks in the clean energy space.
Its resilience stems from its unique technology and utility-scale market. First Solar, Inc. (NASDAQ:FSLR)’s thin-film solar panels have cost and efficiency advantages over many competitors. The superior technology is the catalyst behind strong demand for the company’s solar panels, and the company is well poised to sell 11.8 gigawatts to 12.3 gigawatts of solar panels this year.
The company delivered solid second-quarter financial results whereby earnings came in at $3.25 a share, beating consensus estimates of $2.69 a share. Revenues totaled $1.01 billion, up 24% year over year, above estimates of $941.5 million.
While there have been concerns that First Solar, Inc. (NASDAQ:FSLR) would be one of the companies hard hit with Donald Trump winning the upcoming presidential elections, Morgan Stanley analyst Andrew Percoco believes the risk of the IRA act being repealed is overblown.
“In a scenario where Trump wins the 2024 election, we would expect FSLR to benefit from greater pricing, enabled by additional tariffs on solar equipment imported into the US, or even the perceived risk of incremental tariffs under a potential Trump administration,” Percoco said
First Solar, Inc. (NASDAQ:FSLR) commands an average Buy rating on Wall Street with an average price target of $290, implying a 30.26% upside potential. Additionally, 66 hedge funds out of 912 tracked by Insider Monkey held stakes in the company as of the end of Q2 2024.
Overall FSLR ranks 3rd on our list of the best wind power and solar stocks to buy. While we acknowledge the potential of FSLR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FSLR, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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