Energy Business

J.P. Morgan Sees Big Buying Opportunity in Battered Solar Stocks

Solar and alternative energy stocks as a whole fall into the high beta category. That is the category of stocks that have been hit the hardest in the current market sell-off. However, the current pain for shareholders might mean big gains for investors looking to enter the sector now or add to existing positions. The analysts at J.P. Morgan say flat-out that since the stocks have traded down so significantly, a huge buying opportunity may be at hand.

In a new research report, the J.P. Morgan team points out that solar fundamentals remain very positive and global photovoltaic (PV) solar gigawatt (GW) shipment growth could still be around the 15% level, with solid growth being seen in China and Japan. They also don’t think the supply and demand fundamentals have changed dramatically. With the Bloomberg solar index down a stunning 13% in the past month, the top stocks are there for the picking at much lower prices.

Here are the top solar stocks to buy now at J.P. Morgan.

Canadian Solar Inc. (NASDAQ: CSIQ) is a top pick in the solar space at J.P. Morgan, and the analysts feel good the company will post solid third-quarter numbers. It is delivering panels at today’s costs against projects priced at generous FiT rates from two or more years ago. Canadian Solar is one of the world’s largest and foremost solar power companies. As a leading vertically integrated provider of solar modules, specialized solar products and solar power plants with operations in North America, South America, Europe, Africa, the Middle East, Australia and Asia, Canadian Solar has delivered more than 6 GW of premium quality solar modules to customers in over 70 countries.

The J.P. Morgan price objective for this top stock is $41. The Thomson/First Call consensus price target is $43.75. The stock closed Thursday at $28.11 a share.

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First Solar Inc. (NASDAQ: FSLR) operates through two segments. The Components segment designs, manufactures and sells solar modules, such as CdTe modules that convert sunlight into electricity for project developers, system integrators and operators of PV solar power systems. The Systems segment provides turn-key PV solar power systems or solar solutions, such as project development; engineering, procurement and construction; operating and maintenance; and project finance services to investor owned utilities, independent power developers and producers, commercial and industrial companies, and PV solar power system owners.

The J.P. Morgan price target is set at $76, while the consensus target is $67.50. Shares closed trading Thursday at $53.99.

SolarCity Corp. (NASDAQ: SCTY) is a pure-play leader in the fast growth, roof-top solar as a service market, and the analysts feel the company has a balance sheet that will support growth well into 2015. With many long-term contracts providing visibility into future cash flows, the company is a top name for risk tolerant investors to own. While the J.P. Morgan team does point out that the cost of funding may be higher going forward, it will remain below the 6% residual value calculations considered key.

The J.P. Morgan price objective is $74, and the consensus figure is posted much higher at $90. Shares closed trading at $50.81, so either target is huge for investors stepping in now.

SunPower Corp. (NASDAQ: SPWR) rounds out the big four solar stocks to buy at J.P. Morgan to take advantage of the current weakness in the market. The analysts also like the stock because of the company’s proximity to making a yieldco decision, which the analysts think creates even more value for shareholders. The company offers solar power products, including panels, balance of system components and inverters. It also designs, manufactures and sells high-performance rooftop and ground-mounted solar power systems, as well as utility-scale photovoltaic power plants. In addition, the company offers operations and maintenance services, including remote monitoring, preventative and corrective maintenance services, as well as rapid-response outage restoration and inverter repair services.

The J.P. Morgan price objective is $43, and the consensus target is $40.77. The stock closed trading on Thursday at $29.15.

ALSO READ: 3 Crowded Stocks Down Almost 40% That Could Bounce Back for Huge Gains

Aggressive investors looking to add solar stocks to a portfolio now may have the perfect chance. With lower costs, and an increasing need for energy both from a commercial and residential standpoint, the long-awaited critical mass for the sector may have finally arrived for good. So have lower stock prices.

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