Solar Stocks Are Too Hot

They may have a sunny outlook, but they trade above what we think they're worth.

Brett Castelli 23 September, 2021 | 1:13AM
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Solar Farm

We recently initiated coverage of Enphase Energy, SolarEdge Technologies, and Shoals Technologies and assumed coverage of First Solar. Exposure to clean energy has benefited the shares of these no-moat companies, and all four are trading well above our fair value estimates.

A Leading Supplier to the Distributed Solar and Storage Market

Enphase is the world leader in microinverters, which convert direct current produced by solar panels into alternating current used by homeowners. Its primary end market is U.S. residential, which accounted for 80% of 2020 sales, but it plans to expand internationally and enter the small commercial market. We see the company in the early innings of a longer-term transition from a supplier of microinverters to a supplier of home energy systems: solar, storage, and software.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enphase Energy Inc172.92 USD-0.49Rating
First Solar Inc105.11 USD-1.03Rating
Shoals Technologies Group Inc Ordinary Shares - Class A28.23 USD-3.19Rating
SolarEdge Technologies Inc299.49 USD-1.98Rating

About Author

Brett Castelli  is an equity analyst, energy and utilities, for Morningstar.

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