After a tough 2018, solar power installations appear to be on the upswing around the world, and several stocks should benefit, writes Goldman Sachs analyst Brian Lee.
The back story. The growth of solar power hit a snag in 2018 as global demand fell for the first time. Tariffs imposed by President Donald Trump and changes in solar support in China stymied companies in the industry.
The Solar Energy Industries Association came out with its 2018 market report on Wednesday and found that total U.S. installations fell 2% from the 2017 total.
What’s new. This year is looking much more promising, and the momentum could last for quite some time, Lee writes. Solar stocks are already outperforming the market this year, and Lee expects more gains to come.
Demand for solar power could grow by double digits in 2019 and 2020, as supportive policies in Europe, the U.S., and Asian countries help spur more growth, Lee says. In Europe, more government support could lead to installations jumping 30%, he projects.
Even the Middle East is experiencing a solar boom, with Lee expecting the region to add seven gigawatts of solar in 2019, a 157% rise from 2018.
Looking ahead. Investing in solar-cell manufacturers has been a dicey proposition in the past. Competition is fierce, and prices have fallen precipitously for years. The companies are often debt laden and unprofitable. But Lee thinks prices have stabilized, given the high demand for solar products, and he recommends five stocks to play the trend.
First Solar (ticker: FSLR), a U.S. solar manufacturer that sells to utility companies, could rise 19%, to $64, as utility-scale solar grows at a 40% compound annual growth rate through 2020, Lee writes. First Solar was down 0.5% on Thursday to $54.46.
Canadian Solar (CSIQ) does about a quarter of its business in China, and has exposure to U.S. projects, which Lee thinks could help lift the stock to $26. Canadian Solar was nearly flat on Thursday at $23.23.
Vivint Solar (VSLR) a Utah company that sells to the residential market, could rise to $6.50, Lee projects. Vivint was trading down 0.6% on Thursday to $4.98.
Chinese-traded Longi (601012.China) and Tongwei (600438.China), could rise 8% and 10%, respectively, as revenue surges for their businesses, says Lee.
