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Solar Stocks Continued to Delight Investors

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Solar stocks keep the momentum

There has been a flurry of positive indicators supporting solar stocks recently. The severity of the year-long trade tensions may somewhat ease after President Trump’s meeting with President Jinping on the sidelines of the G20 Summit in Japan. President Trump announced that the US won’t impose any new tariffs on Chinese goods. Sunrun (RUN) surged ~6%, SunPower (SPWR) rose 5%, and Vivint Solar (VSLR) surged ~8% on July 1 on the developments. First Solar (FSLR) stock rose 0.7%. Solar stocks also witnessed a notable surge in their respective daily trading volumes on July 1.

Solar

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Sunny side up

The solar sector has been one of the best performing sectors of this year. SunPower stock leads the pack at the moment and is trading at its two-year high. It is up about 120% so far this year. First Solar and Sunrun have risen almost 55% and 80%, respectively, in the first half of 2019. With their recent surge, top solar stocks are trading in the overbought zone, which indicates an imminent reversal in the stocks’ direction. Solar stocks currently look strong based on their respective simple moving average levels. Sunrun stock is trading at an all-time high. The Guggenheim Solar ETF (TAN) is up more than 55% year-to-date (YTD). First Solar, Sunrun, and SunPower collectively form almost 24% in TAN.

Strong growth prospects

Solar stocks were quite bleak in 2018. Solar installations fell approximately 2% last year after the government imposed 30% tariffs on foreign-made solar panels. According to Reuters, the Solar Energy Industries Association and Wood Mackenzie expect solar installations to increase 25% this year compared to 2018. Previously, the group expected 14% growth in 2019. California has been the frontrunner in installations for the last few years. However, Florida has taken the top spot in the first quarter.

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Lower costs, higher corporate investments along with states’ push for renewable energy have increased solar panel installations in the US in 2019. Almost all the top solar companies reported sluggish revenue growth in the last few quarters. The expectation for more solar installations is good news for solar companies. However, it will be interesting to see if the volume growth gets translated to companies’ profits.

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