The days of the solar industry being a pipe-dream that only eco-friendly green activists support are long over. When prices of polysilicon, one of the main ingredients used to make silicon wafers for solar panels, started to jump, production capacity quickly came online. Combine this with an 18% compounded annual growth rate in demand for solar panels over the last few years, and you have an industry that is on fire.
In a highlighted section included in the new Merrill Lynch research investment committee (RIC) report, the analysts at the firm pointed out that U.S. residential electricity prices have been rising steadily over the last five years, and that has made using or adding solar capabilities a very compelling alternative. In addition, when you toss in the various tax breaks to consumers in many areas of solar installation, you have a winning formula for success.
Here are the top Merrill Lynch solar stocks to buy for investors looking to take advantage of the coming solar adoption and sales boom.
Enphase Energy, Inc. (NASDAQ: ENPH) is one of the highlighted names at Merrill Lynch that we also showed as having real upside and promise of late. Merrill Lynch has a $13 price target for the stock. The Thomson/First Call consensus target is $12.38. The stock closed Monday at $11.72.
SolarCity Corporation (NASDAQ: SCTY) got hit hard during the recent sell-off and may be offering investors a very attractive entry point. The company is a pure-play leader in the fast growth, rooftop solar as a service market. With many long-term contracts providing visibility into future cash flows, the company is a top name for risk tolerant investors to own. The Merrill Lynch team feels that the company’s strong bookings announced during the earnings report will set the tone for continued strong installation growth. The Merrill Lynch price target for the stock is a large $95. The consensus is at $90.78. Shares closed Monday at $73.40.
SunEdison, Inc. (NYSE: SUNE) is another stock rated as a Buy at Merrill Lynch. The firm points to continued positive risk-reward, especially after the company had a successful YieldCo IPO acting as a positive catalyst. The company said recently it was embarking on a project to bring solar-power microgrids to rural India. SunEdison will build and operate the facilities and transfer them to a public entities after five years. The microgrids construction will begin next month. A blowout earnings number recently also set a very positive tone for the company. Merrill Lynch has a $28 price target, and the consensus is at $26.58. The stock closed Monday at $21.65.
SunPower Corporation (NASDAQ: SPWR) 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 Merrill Lynch price target for the stock is $44, and the consensus is at $41.18. SunPower closed Monday at $35.33.
Trina Solar Limited (NYSE: TSL) is a global leader in photovoltaic (PV) modules, solutions and services and a top company based in China for investors to consider. Founded in 1997 as a PV system integrator, Trina Solar today drives smart energy together with installers, distributors, utilities and developers worldwide. The company on Tuesday announced the acquisition of a 49.9 MW utility-scale ground-mounted power project in the United Kingdom from Good Energy Group PLC. The Merrill Lynch price target is up at $22, and consensus is lower at $18.39. Shares closed Monday at $11.89.
The solar industry has turned a significant corner when the price of installation and adoption for the consumer became better than paying the electricity bill. With possible stringent EPA regulations on the way next year, electricity prices may go even higher. If that is indeed the case, the next three years could be larger than even Merrill Lynch estimates.