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Solar Stocks: Sunnova’s Debut, Q2 Earnings, and More

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Jul. 29 2019, Updated 12:58 p.m. ET

Solar stocks traded a little sluggish in the last few weeks. So far, the stocks had a steep run this year. Increasing demand for solar energy and higher corporate investments have fueled investors’ optimism this year. After a weak 2018, the top solar stocks have skyrocketed in 2019. First Solar (FSLR) has risen more than 53%, while SunPower (SPWR) has risen more than 106% this year. Enphase (ENPH) has risen 340% during the same period.

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Key solar stocks

The competition in the residential solar space is getting more stringent due to its growth potential. Texas-based residential solar company Sunnova Energy International (NOVA) raised $170 million in an initial price offer of $12.0 last week. The company gained some ground on July 26 after a weak opening on July 25—its first day of trading. Previously, the company had 17.6 million shares on offer at a price range of $16.0–$18.0. However, Sunnova scaled back on the price.

According to Bloomberg, Sunrun (RUN) issued a note stating that SunNova made false claims about its lower costs and higher customer margins. The note stated that SunNova compared Sunrun’s customer economics in a misleading way. The note might have created a negative impression on investors, which resulted in a weak debut for Sunnova. Based on Sunnova’s SEC filings, it has 63,000 customers. The company reported $104 million in revenues and $68 million in losses in 2018. Currently, Sunnova is valued at around $1.0 billion.

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Second-quarter earnings

Solar companies’ second-quarter earnings will be a crucial driver for the stocks in the short term. Along with their quarterly numbers, management’s commentary and guidance will impact solar stocks. The Solar Energy Industries Association and Wood Mackenzie expect solar installations to rise approximately 25% this year compared to last year, according to Reuters. The strong expected demand will likely boost solar companies’ top line in the next few quarters.

First Solar and SunPower are scheduled to release their second-quarter earnings this week. Analysts expect strong growth in First Solar’s revenues in the second quarter. However, SunPower will likely present a poor show. To learn more, read SunPower’s Earnings: Why Q2 Looks Gloomy.

With the recent weakness, solar stocks are trading close to the oversold zone. The level suggests an impending reversal in the stocks. Credit Suisse raised First Solar’s target price from $53.0 to $55.0 on Monday. The agency also raised SunPower’s target price from $7.0 to $8.0. Credit Suisse raised Sunrun’s target price from $24.0 to $26.0 on Monday.

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