Jefferies, a prominent financial services company, has expressed optimism for the future of solar stocks. In a recent research note, Jefferies initiated coverage of five solar companies and highlighted First Solar as their top pick within the group.
Jefferies analysts, led by Dushyant Ailani, assigned Buy ratings to First Solar, Enphase Energy, and Sunrun, with price targets of $211, $145, and $25 respectively. Array Technologies and SunPower were given Hold ratings with price targets of $18 and $6. Notably, all five stocks were showing upward movement in premarket trading.
According to Jefferies, “In times of uncertainty, we see better risk/reward for companies that have exposure to utility-scale projects and possess strong backlog and balance sheets.” The firm also identified key catalysts for the solar sector in the coming years, including clarity on the Inflation Reduction Act and stabilization of interest rates.
The Inflation Reduction Act offers significant tax benefits to solar manufacturers to incentivize solar projects. However, higher interest rates have negatively impacted the sector by discouraging investment in costly projects like solar panel installations.
Despite lagging behind the S&P 500 this year due to various factors such as project delays, regulatory changes in California, and excess inventory, Jefferies believes there are indications of a potential turnaround for these solar companies.
Within their coverage, First Solar (FSLR) stands out as Jefferies’ top pick. The company meets their key criteria, with a robust backlog of orders and a strong balance sheet. Additionally, Jefferies acknowledges the supportive pricing environment and improving gross margins for First Solar.
“All aboard the solar coaster,” concludes Jefferies in their research note.