Solar Stocks: Analyzing the Top Gainers of 2019

Solar stocks have been a sweet spot among equities this year. On average, they’ve gained 50% this year, notably outperforming broader markets. Solar microinverter maker Enphase Energy (ENPH) has led the solar sector, gaining more than 365% year-to-date. Its peer, SolarEdge Technologies (SEDG), holds the second spot with a gain of more than 130%.

Solar stocks have had a solid run this year

Top solar panel makers First Solar (FSLR) and SunPower (SPWR) have underperformed solar inverter stocks this year, but have still risen 30% and 50%, respectively. Corporate investments, solid quarterly earnings results, and optimistic management commentary have boosted investor confidence in solar stocks this year.

Whereas solar stocks were on fire in this year’s first half, they’ve calmed down in the second half. The Trump administration’s decision to impose 25% tariffs on bifacial solar panels in October impacted First Solar and SunPower.

Enphase and SolarEdge: Top gainers of 2019

Enphase and SolarEdge Technologies provide key technologies to solar panel makers. Both have reported significant earnings growth this year. Year-over-year, Enphase’s revenue has almost doubled year-to-date, and SolarEdge’s has grown about 60%.

Enphase reached an all-time high of $35.40 in late August, marking an approximate 650% gain in this year’s first eight months. However, the stock has corrected by more than 35% since then. For more comparison of ENPH and SEDG, read Enphase Energy or SolarEdge: How They Stack Up. Together, the two stocks form 16% of the Invesco Solar ETF (TAN).

First Solar and SunPower

First Solar stock has been weak after the company’s Q3 earnings release. It has fallen almost 20% since reaching a 52-week high of $69.20 in September. The solar panel maker missed its earnings and revenue estimates in Q3, but still turned around its deep Q2 earnings loss. This year, First Solar expects its EPS to grow around 80% year-over-year to $2.25–$2.75.

SunPower (SPWR) has been one of the top-performing stocks in its market this year, surging more than 50%. However, its gains have almost halved since it reached a 52-week high, and it is now trading close to a seven-month low. SunPower announced plans to spin off its global panel-making business last month. SPWR and FSLR form almost 12% of the Invesco Solar ETF.

Leading solar panel installers Vivint Solar (VSRL) and Sunrun (RUN) have seen their stocks rise about 90% and 25%, respectively, this year. Both have significantly come down since touching 52-week highs in the third quarter.

Solar stocks’ volatility

Solar stocks, generally more volatile than broader markets, are seen as risky by investors. Enphase is one of the most volatile stocks, with implied volatility close to 80%. Its volatility is higher than that of broader market indexes. In comparison, solar stocks First Solar and SunPower have volatility around 30% and 65%, respectively.

Although renewables are growing handsomely, they still have a long way to go. Solid earnings growth might continue to fuel solar stocks for the next few quarters. Investors will likely be paying close attention to regulatory policies, tariff hikes, and stocks’ valuation. To learn more about their valuation, read Solar Stocks: Paying Too Much for a Rosy Outlook?