It is the beginning of a new year, and analysts and investors alike are looking for the most promising sector for the coming year. Credit Suisse’s Patrick Jobin weighed in on the solar sector and, given their low current valuations, he believes the stocks can make solid gains in 2015.
A key issue that should be considered is that Jobin indicates this optimism stems from what could be the unwarranted correlation of solar with oil. As oil has tanked, let’s just say it hasn’t been good for solar and alternative energy stocks.
Credit Suisse expects the solar market to grow 53 GW in 2015, or roughly 21% with continued diversification. Solar currently only represents about 1.2% of electricity generation in the world. Credit Suisse forecasts that by 2020 the total will grow to just 4%, but this could be conservative considering solar’s emerging cost competitiveness.
Oil continues to have an impact on the energy market as it has fallen 52% in roughly four months. Natural gas is down 28% as well, but solar stocks have retrenched 23%. Credit Suisse believes that the drop in natural gas and oil will only have a limited impact on solar energy.
Distributed generation is still in its infancy, and the firm forecasts that the U.S. residential rooftop market grows 62% from 1.2 GWs in 2014 to 1.9 GWs in 2015. Residential solar is still in the early adoption stage, with only 0.7% penetration in the United States. Residential solar costs have fallen over 40% in four years, enabling residential solar to now be economic in 32 states.
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Credit Suisse gave its top picks for the 2015 full year as:
SunEdison Inc. (NYSE: SUNE) remains the top pick for the brokerage firm. In midday trading Tuesday, shares were up more than 4% to $20.75, in a 52-week range of $13.09 to $24.35.
SunPower Corp. (NASDAQ: SPWR) is being upgraded on valuation and approaching yieldco catalysts. Shares were up over 6% to $27.25, in a 52-week range of $22.75 to $42.07.
SolarCity Corp. (NASDAQ: SCTY) and Vivint Solar Inc. (NYSE: VSLR) are considered to have a favorable risk/reward relationship and see the distributed generation sector valuations as fundamentally too low. SolarCity shares were up more than 4% Tuesday, at $51.49 in a 52-week range of $45.79 to $88.35. Shares of Vivint were up over 8%, at $9.04 in a 52-week range of $7.42 to $18.71.
JinkoSolar Holding Co. Ltd. (NYSE: JKS) remains the top pick in the upstream manufacturing space, given cost leadership, downstream catalysts and relative valuation. Shares were up fractionally to $18.61, and the 52-week range is $16.83 to $37.49.
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