The renewable energy sector, and solar energy in particular, is becoming the new trend in the energy industry as more and more people want to invest in this sector. Companies in the solar industry build and install equipment that captures the sun's energy and converts it into electrical energy. Companies in this industry are working together to convert the world economy from fossil fuels such as oil and natural gas to renewable energy sources. Since this conversion will take many years and huge investments, solar stocks are interesting for long-term investors. In this article, you will get an overview of the solar energy industry and we will introduce you to some of the most well-known solar stocks.
HOW DOES SOLAR ENERGY WORK?
Solar energy is generated by converting sunlight into electrical energy. Solar cells or photovoltaic cells (PV cells) are used, which are made of semiconductor materials such as silicon and release electrons when exposed to sunlight. These free electrons are passed through an electrical circuit, which generates electrical energy.
Most solar cells are arranged in panels that are installed on roofs or in fields to generate large amounts of electricity. When sunlight hits a solar panel, it is converted into direct current. However, since most homes and buildings run on alternating current, the direct current generated is converted into alternating current by an inverter. The inverter is also responsible for regulating the current and voltage to ensure a consistent and stable power supply.
OVERVIEW OF THE SOLAR ENERGY INDUSTRY
The solar energy industry is an important part of the global energy sector and has been experiencing strong growth for several years. The industry includes companies involved in the manufacture of solar cells, solar panels and solar systems as well as companies involved in the planning, installation and maintenance of solar systems. Solar energy has developed into one of the most important renewable energy sources in recent years and will continue to play an important role in energy supply in the future and be a key driver for a sustainable and environmentally friendly energy supply.
Significance and development of the solar industry
Solar energy can be used for both private and industrial purposes. Due to its role as an important renewable energy source, the solar industry is growing rapidly in many countries as a result of government investment and subsidies. The industry aims to increase the share of solar energy in global electricity generation and thus contribute to the reduction of CO2 emissions.
Solar energy is generated by photovoltaic systems and solar thermal systems, which are becoming increasingly efficient over time. The development of new materials that increase the efficiency of solar cells, as well as the improvement of manufacturing processes and the use of automated machines, lead to falling production costs and thus to lower prices for solar systems. Economies of scale are also reducing installation and maintenance costs as more and more companies invest in solar energy and competition increases as a result.
Innovations in solar energy
New technologies such as thinner and more flexible solar cells enable more effective use of solar energy and open up new areas of application. The development of more efficient storage systems for solar energy has also further advanced the use of solar energy. Another promising innovation in solar energy is the use of artificial intelligence to control solar systems. By using machine learning algorithms, solar systems can be operated more efficiently and maintenance costs can be reduced.
Growth potential of the solar energy sector
The future prospects for the solar energy industry remain promising. It is expected that the industry will continue to grow in the coming years thanks to the rising demand for renewable energies, the increased expansion of solar energy projects worldwide and the growing importance of sustainability and environmental protection in the global economy.
According to a new study by Grand View Research from 2022 the global market for solar energy systems is expected to grow to USD 607.8 billion by 2030. The report forecasts average annual growth of 15.7% between 2022 and 2030.
The report also highlights that the demand for repair and refurbishment of existing solar energy systems will increase significantly. Regions such as the Middle East and Africa as well as Asia-Pacific will see significant growth due to investments and high demand for energy.
Challenges and competition with other energy sources
Although solar energy is seen as a promising energy source, it still has some challenges to overcome, especially in terms of its competition with other energy sources. Coal, gas and nuclear power are established and cost-effective energy sources that have been in use for decades and have extensive infrastructure in place. In comparison, solar energy is still a relatively new technology and does not have the same kind of infrastructure as traditional energy sources. This means that it can be more difficult for solar companies to gain a foothold in new areas and compete with established companies.
Another problem with the use of solar energy is that it is only produced when the sun is shining. This leads to an unstable energy supply, which can be problematic for the energy supply of cities and industries. To solve this problem, energy storage technologies such as batteries need to be developed to store excess solar energy and use it later when the sun is not shining. However, such storage technologies are expensive and the technology is not yet as mature as that of traditional energy sources. Another obstacle to the development of storage technology is that it often cannot keep up with the scaling required to deploy solar energy on a large scale.
THE LARGEST AND BEST-KNOWN SOLAR ENERGY SHARES AT A GLANCE
In the table below you will find an overview of some of the best-known and largest solar stocks, followed by a selection of company descriptions of some of the companies.
| Company | Symbol | Country | Market capitalization |
| Enphase Energy Inc | ENPH | USA | USD 27.45 billion |
| First Solar Inc | FSLR | USA | 21.56 billion USD |
| SolarEdge Technologies Inc | SEDG | USA | USD 16.05 billion |
| Siemens Energy AG | ENR | Germany | USD 13.95 billion |
| Sunrun Inc | RUN | USA | USD 4.06 billion |
| Dago New Energy Corp ADR | DQ | China / Share (ADR): USA | USD 3.43 billion |
| SMA Solar Technology AG | S92 | Germany | USD 2.98 billion |
| Canadian Solar Inc | CSIQ | Canada | USD 2.45 billion |
| SunPower Corporation | SPWR | USA | USD 2.36 billion |
| Sunnova Energy International Inc | NOVA | USA | USD 1.69 billion |
FIRST SOLAR
- Company: First Solar Inc
- Symbol (TWS): FSLR
- ISIN: US3364331070
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: 21.56 billion
- Turnover (TTM) in USD: 2.62 billion
First Solar is a global leader in the development of solar energy solutions. The company develops, manufactures and distributes advanced solar modules. What sets First Solar apart from other solar module manufacturers is its focus on producing an advanced so-called thin-film module. In less ideal conditions, such as low light and warm weather, these modules perform better than competing silicon modules. They are also larger, which helps to reduce the cost per watt.
Brief analysis & outlook
With a very strong balance sheet, First Solar has the financial flexibility to continue its strategy of developing and manufacturing thin-film solar modules for large-scale consumers. The company is therefore in a very good position to expect rising profits and sales as the solar industry continues to grow. The First Solar share started a massive upward trend at the end of July 2022 and has only known one direction since then: upwards. The share is convincing due to its relative strength compared to the broad market and was one of the few shares to generate several new 52-week highs at a time when the overall market was still in bear mode. The upward trend received a new tailwind in March of the current year with the quarterly results, which were published on February 28 after the end of trading. The reported results for the past quarter were not only significantly better than expected; investors were particularly impressed by the outlook and First Solar CEO Mark Widmar stated: "We end 2022 with a record order backlog, a large number of order opportunities in the pipeline and a strong balance sheet that puts us in a position to respond to new opportunities."
SMA SOLAR
- Company: SMA Solar Technology AG
- Symbol (TWS): S92
- ISIN: DE000A0DJ6J9
- Stock exchange: XETRA
- Country: Germany
- Currency: Euro
- Market capitalization: EUR 2.79 billion / USD 2.98 billion
- Turnover (TTM) in USD: 1.03 billion
SMA Solar Technology is a German company that manufactures both residential and commercial solar systems. The company focuses primarily on solar inverters and monitoring systems for solar power. The company divides its activities into three main segments: Home, Business and Large Scale & Project Solutions. In terms of sales, the three business segments are relatively balanced. SMA Solar's most important market is Germany, although the company is also increasingly establishing itself in the USA and expanding internationally.
Brief analysis & outlook
The SMA Solar share is also on an upward trend, driven by strong company results and an optimistic outlook for 2023. Last year, sales increased by 8.4 %, despite the difficult macroeconomic environment. The EBITDA margin and operating result also increased very strongly and the company expects continued strong growth. According to SMA Solar, this is due to high demand and the improved availability of electronic components. CEO Jürgen Reinert mentioned: "We can look back on a turbulent but very successful year for SMA in 2022. The gradual improvement in the availability of electronic components significantly boosted our ability to deliver in the second half of the year. In addition, we have consistently made the company even more customer-centric in recent months."
DAQO NEW ENERGY
- Company: Daqo New Energy Corp
- Symbol (TWS): DQ
- ISIN: US23703Q2030
- Stock Exchange: New York Stock Exchange
- Country: Head office: China / Share (ADR): USA
- Currency: US Dollar
- Market capitalization: USD 3.43 billion
- Sales (TTM) in USD: 4.61 billion
Daqo New Energy is based in China and produces polysilicon, which is used to manufacture solar cells. China is currently the world's largest producer of solar cells and Daqo is therefore well positioned to benefit from the country's leading role in the green energy sector. Another driver for the Daqo share is the increasing demand for polysilicon. Much of this growth flows directly into Daqo's profits. The company is one of the 10 largest polysilicon producers in the world and plans to expand its capacity significantly in the coming years. As the solar industry is booming and demand for polysilicon is expected to remain high, Daqo New Energy could continue to benefit from this trend in the coming years.
Brief analysis & outlook
Although the Daqo New Energy share has not been able to keep up with the two previously presented shares in terms of price performance in recent months, it has a prominent support area in the USD 40 range, which has been defended several times and a broad bottom formation currently appears to be forming. Daqo's price has already gained more than 20 % since January 2023. The next bullish signal would be a breakout above the resistance in the USD 58-60 range.
Daqo Energy continues to grow strongly. Over the last 12 months, EPS growth amounted to 145 % and revenue growth to 175 %. The company is also currently benefiting from a normalization of macroeconomic factors and has announced after the end of the first quarter of 2023 that capacity utilization has improved and customers are responding to lower prices and thus demand is picking up again.
SUNPOWER CORPORATION
- Company: SunPower Corporation
- Symbol (TWS): SPWR
- ISIN: US8676524064
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 2.36 billion
- Turnover (TTM) in USD: 1.74 billion
SunPower Corporation is a leading provider of innovative solar solutions for residential and commercial buildings and large power plants around the world. The company was founded in 1985 and is headquartered in San Jose, California. SunPower is committed to developing solar products that achieve higher energy efficiency and performance than conventional solar solutions. The company offers a wide range of solar products, including solar panels, inverters, storage systems and monitoring tools that enable customers to reduce their energy costs while minimizing their environmental footprint.
Brief analysis & outlook
Sunpower Corporation shares have been very volatile in recent years, highlighting both the high potential and the high risks associated with an investment in the solar industry. After the share price rose from less than USD 3 in March 2020 to around USD 55 within a year, the trend reversed. The share is currently still in downward mode and is trading at its lowest level since October 2020. SunPower achieved earnings growth of 65 % and revenue growth of 35 % in the last four quarters. The downward trend has recently been fueled mainly by concerns about further rising interest rates in the US. The short interest is very high at 20 % and shows that the price weakness can also be explained by strong speculation on falling prices. However, as the company's outlook is positive, there is a possibility that the short speculators are wrong and that a strong short squeeze could emerge if a bottom is reached, which would result in sharply rising share prices.
SOLAREDGE TECHNOLOGIES
- Company: SolarEdge Technologies Inc
- Symbol (TWS): SEDG
- ISIN: US83417M1045
- Stock exchange: NASDAQ
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 16.05 billion
- Turnover (TTM) in USD: 3.11 billion
SolarEdge Technologies manufactures power optimizers and inverters that convert solar energy into usable electricity. These components have improved the way solar panels convert the direct current generated by the sun into the alternating current used by the grid. A system using SolarEdge's power optimizers is therefore often less expensive than systems using competing products. SolarEdge's focus on producing low-cost power optimizers has allowed the company to gain market share from competitors. The company has also invested money in the acquisition and development of new products in the areas of energy storage and energy management as well as intelligent modules in order to increase the average revenue per system. A strong balance sheet and high liquidity also allow SolarEdge to expand into other energy market segments, such as storage, electric vehicle charging, batteries, uninterruptible power supplies and more.
Brief analysis & outlook
The Solaredge Technologies share has not developed a clear trend over the past two and a half years and has mainly moved sideways, after the share price increased around tenfold in 2019 and 2020. After such a massive price rally, it is not unusual for a share to undergo a prolonged consolidation. Solaredge has been a profitable company for many years and its earnings and sales growth is still impressive. As long as the share does not break out of the consolidation formation, an investment is certainly associated with increased risks, as both an upward and downward breakout is technically possible.