Given the enthusiasm among many analysts and investors for clean energy and ESG (environmental, social and governance) stocks, Monday’s actions by analysts at Goldman Sachs may seem a bit out of whack. In a research note, the firm calls four solar energy stocks a Buy, three to remain Neutral and three more to Sell.
Analysts Brian Lee and Baoyi Zhou wrote that overall they remain positive on solar stocks in 2021, citing long-term growth prospects, cheap financing and renewed government support. The downside, however, is oversupply.
The analysts estimate that approximately 120 gigawatts (GW) of new module capacity over 2020 and 2021 far outruns some 25 GW of new demand. That will drive down factory utilization rates and put pressure on prices and margins for makers of solar panels.
Solar installation growth is expected to reach 18% in 2021 (134 GW), and the compound annual growth rate is forecast at 17% through 2024. The analysts also expect battery storage sales to more than double year over year, with demand continuing to outstrip supply and pushing prices and margins higher.
Here are the 10 solar stocks that Goldman reviewed.
Sunnova Energy International Inc. (NYSE: NOVA) provides approximately 80,000 customers with residential solar and energy storage services, including operations, maintenance and upgrades. Over the past 12 months, the stock has added about 290% to its share price. Shares posted a new 52-week high on Monday.
The company made Goldman’s Americas Conviction Buy list, and the analysts have raised their price target on the stock from $45 to $60. The mean target is $40.50, even though Sunnova is not expected to post a profit for two more years. The stock trades at a multiple of 26.8 to expected sales in 2020 and 19.9 in 2021.
The stock traded up more than 2% Tuesday morning, at $45.97 in a 52-week range of $6.12 to $49.34. Based on Goldman’s price target, the 12-month potential upside on Sunnova stock is 33%.
Enphase Energy Inc. (NASDAQ: ENPH) makes devices known as microinverters that attach to each module of a solar panel and convert direct current to alternating current. The company also makes monitoring and control software for solar installations. Its shares rose by more than 570% in 2020.
Goldman Sachs raised its rating on Enphase from Neutral to Buy and lifted the price target from $258 to $313. The mean price target is $126.50, and the multiple to expected 2021 earnings per share (EPS) is 92.6, falling to 68.7 in 2022.
Shares traded up more than 6% to $182.60, in a 52-week range of $21.49 to $189.41. Enphase sports a potential upside of 35%, based on Goldman’s 12-month price target.