Industry analysts have predicted future solar stock winners for decades, but the cost of solar has always been a double-edged sword. The issue was that the cost per megawatt-hour was simply too high. Bloomberg New Energy Finance shows that price has come down significantly in the last seven years.
That’s one reason it may be time for investors to consider investing in solar. The other is the projected growth. The global solar power market is forecast to grow at a compound annual growth rate (CAGR) of 6.9% through 2028.
That would mean revenue in the sector will grow from $234.86 billion in 2022 to 373.84 in 2029.
Not every stock on this list will meet the definition of “up-and-coming.” However, with the sector down so much this year, even established solar companies are seeing a downturn in their stocks.
The clean energy transition may still have decades to go, but it’s not going away. Here are seven companies that look like future solar stock winners.
SolarEdge Technologies (SEDG)
SolarEdge Technologies (NASDAQ:SEDG) may be the most recognizable names on this list of future solar stock winners. SolarEdge is an Israeli company that manufactures and sells complete solar solutions for residential and commercial customers.
The company is expecting significant growth in Germany and Italy. Russia’s war against Ukraine is generating more urgency for renewable energy solutions. Customers in these countries continue to look for complete solar solutions, including the batteries to power them.
In August, 2023 SolarEdge posted record overall revenue of $991.3 million besides record solar revenue of $947.4 million. The company also posted a 32% gross margin. Both revenue and earnings per share were higher on a year-over-year basis, continuing a trend that’s been in place for several quarters.
We expect earnings to grow by over 30% in 2023. That would be enough to support analysts’ forecasts for a 108% upside in SEDG stock, which is trading at the bottom of its 52-week range.
Altus Power (AMPS)
Altus Power (NYSE:AMPS) offers its customers the benefits of solar power without the customer having to install solar panels or changing their existing bill.
They do this by investing in and helping to develop large-scale community solar farms. The company is the largest owner of commercial solar in the United States with 698 mW across 25 states.
The story for Altus is growth. In its August earnings report, the company reported record revenue of $46.5 million, but what really drew investor attention was the company’s earnings per share of four cents. Not only did that beat the estimate of two cents per share, but it also erased two straight quarters of negative earnings.
Earnings are projected to grow by 112.50%. If that happens, the 57% upside projection for AMPS stock may be too low.
Array Technologies (ARRY)
Array Technologies (NASDAQ:ARRY) is a pick-and-shovel way to invest in future solar stock winners. The company manufactures solar trackers.
Obviously, this ties the fortunes of Array to the solar panel industry. And for a variety of reasons, including the weather, the growth expected in the solar industry this year has not been as robust as expected.
Array continues to post year-over-year revenue growth, and it has a $1.7 billion backlog of orders that should help assure investors that its growth trajectory will continue. Earnings are expected to grow by 39% in the next year.
That may not be fully reflected in analysts’ estimates. But if the company keeps delivering YOY revenue and earnings growth, higher price targets will come. As it is, 18 out of 22 analysts give ARRY stock a Strong Buy or Buy rating.
Sunnova Energy International (NOVA)
Sunnova Energy International (NYSE:NOVA) is a leading national residential solar company. Besides solar panels, the company provides whole-home energy storage solutions including maintenance, monitoring, repairs, and replacement.
The company serves nearly 350,000 customers in over 25 states and territories.
Sunnova is a small-cap company with a market cap of just 1.62 billion. Revenue isn’t Sunnova’s issue. They continue to post YOY gains. There is concern however about the company’s earnings. Not only is the company not profitable, but the losses continue to grow.
This is causing some analysts to point to the company’s debt situation. And that’s a reasonable concern.
However, the company is expecting to eclipse the $1 billion in revenue mark in 2024. If they manage to hit that milestone, positive earnings, and earnings growth should follow.
Sunworks (SUNW)
With a market cap of just 34 million, Sunworks (NASDAQ:SUNW) is the smallest of the future solar stock winners. The 22-year-old company bills itself as a “premier provider of high-performance solar power systems.”
The company’s revenue soared in 2021 and 2022. The company’s stock price rode the wave and was trading for over $20 a share in late 2021.
This year has been a different story, but it may be setting up an ideal opportunity for investors.
Revenue is down on a year-over-year basis, and the company is still not profitable, but revenue is still significantly higher than it was in 2019, but that growth is not reflected in the company’s stock price.
On the other hand, investors may be shying away from SUNW stock after the company announced a $3.3 million registered direct offering on August 9, 2023. The stock is down 29% since that announcement and dipped below the crucial $1 mark.
With that in mind, SUNW stock may be best left to momentum traders. However, long-term investors should have Sunworks on a watchlist.
Daqo New Energy (DQ)
Daqo New Energy (NYSE:DQ) is another pick-and-shovel company on this list of future solar stock winners. At a time when many investors are looking to invest in stocks because of China rather than in China, you should know this is a China stock. This global leader in producing high-purity polysilicon is headquartered in Shanghai.
China is the world’s largest producer of solar panels. That was a catalyst for the company in 2021 and 2022 when it saw revenue hit record levels. That growth has slowed in 2023 which is likely a function of the economic slowdown in China.
However, Daqo is one of the China stocks that offers a solid risk-reward profile. DQ stock currently has a forward P/E ratio of just 3.8x. Even though analysts suggest that the stock may not have much upside, this is a stock that could reward risk-tolerant investors if the solar industry turns around as expected.
Shoals Technology Group (SHLS)
Shoals Technologies (NASDAQ:SHLS) makes this list of future solar stock winners because of its made in the U.S.A. focus. When onshoring is becoming a priority, Shoals stands out.
The company is the leading provider of electrical balance of system solutions and components for solar energy products. Shoals also sells EV charging solutions.
Like many companies on this list, Shoals is showing strong YOY revenue growth. However, one thing that sets Shoals apart is that it’s solidly profitable, and earnings are expected to grow by over 60% in the next 12 months.
At 39x forward earnings, SHLK stock isn’t cheap. However, analysts are pricing that earnings growth into their models as the consensus price target gives the stock a 59% upside.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.