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Goldman Sachs analyst Brian Lee made a series of moves in the firm’s research coverage on solar stocks after a strong run-up in shares.
Some solar stocks are up 40% over the past month after the U.S. House passed the Inflation Reduction Act (IRA), which includes $370 billion for reducing emissions and promoting green technology.
Lee sees IRA as a “significant positive for the entire solar sector,” hence the strong move higher in shares is justified.
“We see stocks with US leverage and/or US-based manufacturing as fundamentally best positioned, and we take a deeper dive look at where valuation would suggest further upside exists, with ~40% return potential still remaining across our Buy rated ideas,” Lee said in a client note.
Along these lines, the analyst double-upgraded First Solar (NASDAQ:) and Maxeon Solar (MAXN) to Buy from Sell, while conversely downgrading Shoals (SHLS) to Sell from Buy and Canadian Solar (NASDAQ:) to Sell from Neutral to reflect “downside risk to estimates and relatively less leverage to upside benefits from IRA.”
Overall, the analyst sees about 50% average upside potential still left in solar stocks and names Sunrun (NASDAQ:) and Array (ARRY) as two stocks with the most upside potential.
“We see FSLR and ARRY as the immediate beneficiaries of solar panel and tracker component credits, respectively. We believe MAXN is in position to be a likely beneficiary of solar cell and panel credits assuming it is able to establish 3GW of additional capacity in the US in 2025. We also see ENPH and SEDG as potential beneficiaries of inverter manufacturing credits,” Lee added.
By Senad Karaahmetovic
