With climate change becoming a front-and-center story again after two horrific hurricanes ripped into Texas and Florida, and with people clamoring for more alternative energy, it’s clear that the bigger picture might be the fact that burgeoning middle class growth in China could drive the need for energy, and solar can help fill that need. The country expected to add 35 to 40 gigawatts in 2018, though that is lower to inline with this year, but it still represents solid growth.
A new JPMorgan research report hardly pounds the table on the industries, but it does have a trio of companies the analyst feels makes sense for investors now. With China remaining the growth driver for the sector, and the country’s unpredictable demand always being a wild card, the firm sticks with three top stocks for investors to consider. All are rated Overweight.
This company offers investors a solid dividend play. 8Point3 Energy Partners L.P. (NASDAQ: CAFD) is a dividend growth-orientated company formed by its sponsors and general partners SunPower and First Solar to own and operate contracted renewable generation assets. Its principal geographic focus is North America. Management targets 3% quarterly growth in limited partnership distributions through continued dropdowns from its sponsors.
The company reported top-line numbers that beat expectations last time out, although earnings per share was slightly less than expected. The stock remains a favorite at JPMorgan and is a great way for aggressive accounts to play the sector.
8Point3 investors are paid a strong 7.36% distribution. The JPMorgan price objective for the shares is $16, which compares with the Wall Street consensus figure of $15. The stock traded early Thursday at $14.45 a share.
This is a solid play on China, as well as another top stock for aggressive accounts to consider. JinkoSolar Holding Co. Ltd. (NYSE: JKS) has built a vertically integrated solar power product value chain, from recovering silicon materials to manufacturing solar modules and solar power generation. Its segments focus on manufacturing and solar power projects.
The manufacturing segment includes its vertically integrated solar power product manufacturing business, under which the company manufactures silicon ingots, wafers, cells and solar modules.
The solar power projects segment is composed of the downstream solar power generation, construction and operation business, including power generation; engineering, procurement and construction (EPC) and connecting solar power projects to the grid; and operation and maintenance of the solar power projects. The company sells its solar modules under the JinkoSolar brand. Its services include solar system EPC and processing services.
JPMorgan has a $27 price target, while the consensus target is $18.60. The shares traded above both levels on Thursday at $29.55.
This company has had a strong run in 2017 and remains a top pick at JPMorgan. SolarEdge Technologies Inc. (NASDAQ: SEDG) designs, develops and sells direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations in Israel, Europe, the United States and elsewhere. The company’s DC optimized inverter systems include power optimizers, inverters and cloud-based monitoring software. Its products are used in a range of solar market segments, including residential, commercial and small utility-scale solar installations.
The company sells its products directly to solar installers, as well as engineering, procurement and construction firms. It sells them indirectly to solar installers through distributors and electrical equipment wholesalers, as well as PV module manufacturers.
Some on Wall Street feel the company is due some multiple expansion given the higher margin HD wave products (3% to 5%) mix, which can grow from 20% to 25%, to more than 60% by the end of 2017. Meanwhile, cost reduction across all products could exceed expectations and drive margin expansion even if average selling prices were to decline this year toward company’s long-term gross margin target of 32% to 37%.
The $31 JPMorgan price objective compares with a $27.27 consensus target. The shares were last seen at $26.70.
Three top companies to buy for the rest of 2017 and beyond. Given the nature of the industry, these stocks are better suited for aggressive growth accounts that can tolerate big fluctuations in shares prices.