Investment plan

Senate Approves $369 Billion Energy Investment Plan: Solar Stocks to Win – September 9, 2022

The renewable energy industry has been growing since the US Senate passed the Inflation Reduction Act of 2022 (“IRA”). To combat the ongoing climate crisis and strengthen America’s energy infrastructure, the IRA involves an investment of $369 billion over the next 10 years. This Climate Bill, part of the IRA, is expected to reduce the country’s carbon emissions by around 40% by 2030.

Such investment should act as a catalyst for renewable energy in a context of rising energy prices and worsening climate problems. With solar taking a prominent place in the clean energy arena, such strong funding shines a light on three established solar stocks, namely First Solar (FSLR free report), Enphase Energy (ENPH free report) and Sun Power (SPWR free report).

Climate Bill Highlights

In addition to the incentive, the bill proclaims tax credits for homeowners using clean energy. The Solar Investment Tax Credit (“ITC”), which is considered the most effective mechanism for driving solar adoption, has increased from 26% to 30% through 2033, making it more affordable for consumers. The energy storage division is also getting a boost under the current IRA by including the 30% ITC for stand-alone storage projects.

Such an incentive is likely to propel demand for solar energy as consumers struggle with rising utility bills. That said, the government would deploy 950 million solar panels and 2,300 grid-scale battery stations to power homes, businesses and communities with clean energy by 2030.

The government also plans to provide incentives to increase the country’s domestic solar generation capacity. This would ensure sustainability and timely delivery of key materials and reduce reliance on China.

Actions to Consider

Considering the aforementioned factors, the solar stocks that are poised to benefit from the most aggressive climate investment plan ever passed by Congress are:

First Solar is one of the world’s leading providers of complete photovoltaic solar energy solutions. Its Modules segment is involved in the design, manufacture and sale of solar modules. FSLR recently revealed plans to expand its solar module production capacity by investing $1.2 billion to build US domestic solar manufacturing capacity.

First Solar’s long-term earnings growth rate is pegged at 49.3%. The company posted a surprise four-quarter average profit of 13.74%. First Solar currently wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enphase Energy holds a strong position in the solar market and manufactures fully integrated solar-plus-storage solutions. As of June 30, 2022, more than 48 million microinverters have been shipped, while approximately 2.5 million Enphase residential and commercial systems are deployed in more than 140 countries.

The company has a long-term earnings growth rate of 47.10%. Zacks’ consensus estimate for ENPH sales in 2022 implies a 63% improvement over the previous year’s figure. Enphase Energy currently carries a Zacks Rank #2 (Buy).

Sun Power is one of the most integrated solar companies forward. The company added 19,700 customers in the second quarter, reflecting 51% year-over-year growth. This expanded its total customer base to 463,600. The company expects residential customers to be between 73,000 and 80,000 in 2022.

Zacks consensus estimate for SPWR sales in 2022 suggests a growth rate of 26.1% over the figure reported the previous year. Zacks consensus estimate for its 2022 revenue points to a solid growth rate of 300% from the reported 2021 figure. SunPower has a Zacks rank of #3 at present.