Image: Bigstock

Solar stocks witnessed quite a rebound this week following Tuesday’s presidential debate in which democratic nominee Kamala Harris emphasized building out alternative energy assets.

Despite housing attractive stocks such as First Solar (FSLR - Free Report), Sunrun (RUN - Free Report), and Array Technologies (ARRY - Free Report), the Zacks Solar Industry is in the bottom 43% of over 250 Zacks industries.

With the production and usage of solar energy still somewhat in the beginning stages of its development, the industry has struggled amid a high inflationary environment although there are pockets of opportunities for investors. 

First Solar Stock: The Industry Leader

First Solar led the recent rally in solar stocks, as shares spiked nearly +15% since Tuesday’s presidential debate due to its status as the largest solar module manufacturer. After seeing expansive growth, First Solar’s stock has moved up +35% this year.

After such a sharp rally this year, First Solar’s stock lands a Zacks Rank #3 (Hold) rating, but projections of high double-digit top and bottom line growth in fiscal 2024 and FY25 may make the company a viable long-term investment.

Image Source: Zacks Investment Research

Sunrun Stock Sports a Zacks Rank #1 (Strong Buy)

As a provider of residential solar energy systems, it’s noteworthy that Sunrun is the top-rated stock among the Zacks Solar Industry. Sporting a Zacks Rank #1 (Strong Buy), earnings estimate revisions have trended higher over the last 60 days for FY24 and FY25 as Sunrun has continued to strive for profitability.

Image Source: Zacks Investment Research

Furthermore, Sunrun’s top line expansion alludes to its future earnings potential, as total sales are now expected to dip -5% this year but are projected to rebound and climb 20% in FY25 to $2.57 billion. Plus, FY25 sales projections would be a 100% increase from pre-pandemic levels, with 2019 sales at $859 million.

Sunrun’s cash & equivalents have also skyrocketed from $363 million in 2019 to over $1 billion at the end of Q2 2024. Improving financial metrics have started to justify the premium being paid for Sunrun’s stock in regards to it not being profitable and its recent trading value of around $20.  

Image Source: Zacks Investment Research

Array Technologies Stock may be Poised for a Sharp Rebound

Providing ground mounting systems used in solar energy projects, Array Technologies' stock may be poised for a sharp rebound, considering the company has been turning a profit and the stock has been seen trading at just $6.

Array Technologies has fallen sharply from its 52-week high of $26. The stock has traded at 9.6X forward earnings, with EPS slated to drop -39% in FY24 but expected to rebound and soar 49% next year to $1.03 per share.

The stock was up +2% in Friday’s trading session. It currently has a Zacks Rank #3 (Hold) rating, along with an “A” Zacks Style Scores grade for Value.

Image Source: Zacks Investment Research

The Zacks Solar Industry’s Performance

Year-to-date, the Zacks Solar market is still down -16% which has been very subpar compared to the S&P 500 and Nasdaq’s gains of over +15%. The solar market is down -4% this month to also underperform the broader indexes despite this week’s rally.

Image Source: Zacks Investment Research

Final Thoughts

Although investors may be hoping for an extended rebound among solar stocks, it's best to choose carefully when investing in these equities.

While First Solar, Sunrun, and Array Technologies appear attractive among others, there is still a lot of downside risk in many solar stocks. Rate cuts will certainly help, as inflation has taken a toll on their operating environment and development.

More By This Author:

Kimberly-Clark Stock Up 20% YTD: Should You Buy or Hold Tight?
Time To Buy These Intriguing Transportation Stocks
Bear Of The Day: Exxon Mobile