The shares of solar stocks have been on fire this week after Canadian Solar (CSIQ) reported higher than expected profits and provided guidance that beat expectations on Monday. Despite its name, Canadian Solar owns and operates multiple factories in China.

The solar panel maker's earnings per share came in at $1.01, versus the consensus outlook of 96c. It reported revenue of $1.1 billion, slightly below the consensus outlook of $1.14 billion. However, Canadian Solar provided first-quarter revenue guidance of $1.37 billion-$1.4 billion, compared with the consensus estimate of $1.13 billion, and its fiscal 2018 revenue guidance came in at $4.4 billion-$4.6 billion, compared with the consensus outlook of $3.98 billion.

Canadian Solar's guidance for first-quarter profit margin of 10%-12%, which is low but still significantly positive, probably reassured investors. The company's statement that "we have seen demand from many new markets, such as Middle East, Australia and Latin America" likely also made investors more upbeat about the outlook for solar stocks. And importantly, although Canadian Solar said that it had seen "a slowdown in solar module demand.entering into 2018," Canadian Solar expects  6.6 to 7.1 megawatts of module shipments this year. The midpoint of that guidance is actually a hair above the 6,828 megawatts of modules that the company sold last year. The guidance suggests that those who have predicted a significant slowdown in solar module sales this year have been misguided.

Since Monday, many solar stocks, including First Solar (FSLR), Sunpower (SPWR), JK Solar (JKS), Daqo New Energy (DQ), and of course, Canadian Solar (CSIQ), have rebounded strongly. 

The rally also comes after UBS issued a bullish note on solar energy stocks last week, predicting that U.S. solar demand would reach 14.7 gigawatts in 2020. 

I believe that over the longer term, rapidly increasing demand from China and India will boost solar energy companies' profits and solar stocks. Also over the longer term, much higher demand for electric cars should raise electric prices, causing solar companies' top and bottom lines to rise as the fortunes of their primary customers - electric utilities - improve.