The storm clouds continue to gather over solar stocks.
Sunrun
was the latest residential solar company to report disappointing earnings late Wednesday. Weak demand has been a major issue for the sector over the past year or so, as higher interest rates have caused consumers to delay financing home solar installation projects. Changes to California’s rooftop solar incentives and a slump in demand in Europe have also contributed to the industry’s pain.
Lower rates should help the sector mount a recovery, but the timeline for the Federal Reserve to begin cutting is uncertain—particularly after the minutes from the central bank’s latest meeting, released Wednesday.
Sunrun
reported a loss of $1.60 per share in the fourth quarter, a wider loss than the 21 cents expected by Wall Street. Revenue fell to $517 million, a 15% drop from the same period last year and missing estimates of $533 million, according to FactSet data. Sunrun stock pointed 9% lower ahead of the open Thursday.
Earnings season hasn’t been kind to residential solar companies.
Sunnova
also reported results after the close Wednesday. The Houston-based company posted a loss of $1.53 per share, worse than expectations of a 26 cents-per-share loss, according to FactSet data. Revenue also missed expectations, and
Sunnova
stock fell 5% early Thursday.
Shares of
SolarEdge
tumbled 12% Wednesday after the company’s revenue plunged 65% in the fourth quarter and its outlook painted a gloomy picture at the start of 2024. Other solar stocks fell in Wednesday’s session, including Sunrun and First Solar which both declined 2%. The Invesco Solar exchange-traded fund (ETF) dropped 2.3%, and is now 40% down over the past 12 months.
The broader industry appeared set to at least stabilize Thursday, except Sunrun and Sunnova.
Enphase Energy
was 0.8% higher,
First Solar
rose 1.3% and
SolarEdge
was 0.2% up.
The Federal Reserve has a key role to play in the sector’s potential recovery as lower interest rates may stimulate demand for solar panels. However, minutes from the central bank’s latest meeting suggested rates could stay higher for longer. Fed officials won’t start cutting rates until they have “greater confidence” that inflation is heading toward 2%, the minutes revealed.
Susquehanna analyst Biju Perincheril is bullish on Sunrun stock—he has a Positive rating with a price target of $25, implying a 60% upside to Wednesday’s close. He sees interest-rate cuts as a key catalyst for the stock, and higher rates as a downside risk.
However, there is little doubt the Fed will start cutting rates at some point this year—the only uncertainty lies in when.
Investors may have to wait a bit longer but the solar sector’s gloom should eventually lift.
Write to Callum Keown at [email protected]
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