Solar stocks have been volatile, to say the least, over the past month, with investors pricing in the possibility that recovery in a sector hit by high interest rates may take longer than expected. The possibility of Donald Trump winning in November also shook things up.
The Invesco Solar ETF (TAN) rose 5% along with the broader market on Friday, after falling as much as 10% since the Federal Reserve cut interest rates in September. This is a long-awaited move by the industry to lower mortgage financing costs for homeowners. their project.
However, over the past month, the 10-year Treasury yield (^TNX), a barometer of lending rates, has actually been rising, not falling.
Canaccord Genuity analyst Austin Moller told Yahoo Finance: “Given that solar loan interest rates haven’t changed much yet, it will take a little longer for the U.S. market to fully recover. I expect it to be the same,” he said.
Mueller’s analysis earlier this month showed average interest rates on green project and upgrade loans for a group of six U.S. financial institutions ranged from 8.94% to 31.41%. (Loan interest rates often depend on the amount of your down payment and your credit score.)
Shares of California-based solar panel and microinverter maker Enphase Energy (ENPH) soared 15% on Wednesday after the company announced disappointing outlook, largely due to weak demand in Europe. It fell soon. Competitive pressures and regulatory issues in Europe have also weighed on SolarEdge (SEDG) stock, which has fallen 83% since the beginning of the year.
Following the company’s third-quarter results, Mueller and his team downgraded Enphase stock from “buy” to “hold” and lowered their price target from $140 to $95.
Guggenheim analyst Joseph Osha also downgraded the stock from “neutral” with a price target of $73 to “sell”, citing “significant challenges” in Europe.
However, in the US, Enphase reported positive signs of improvement, with revenue increasing 43% compared to the previous three months. That’s despite SunPower (SPWRQ), its largest distribution customer, filing for Chapter 11 bankruptcy protection in August amid issues related to accounting issues and industry-wide challenges.
Tackle “issues”. Enphase Microinverter System Powers 902kW Project Installed by Northstate Solar Energy (Business Wire) · Business Wire
During the company’s earnings call, Enphase CEO Badri Kothandaraman said the company has more than 50% market share in the United States. He also pushed back against the idea that the recent spike in U.S. Treasury interest rates will slow the recovery in residential solar power.
Kosandaraman noted that the Fed is expected to continue lowering interest rates, coupled with trends in power prices, which is expected to provide a tailwind. “The data remains optimistic for growth in the overall U.S. market in 2025,” he said.
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Kothandaraman was also asked about another rally in solar stocks this year: the possibility of a landslide victory for Republicans in November’s election. Former President Trump has threatened to cut funding from the Inflation Control Act (IRA), which currently provides residential tax credits for installing renewable energy systems.
“If that gets disrupted at this stage, I don’t think it would be good for the market as a whole,” Kothandaraman said. But he predicted the chances of the tax credit being eliminated are “very, very low, probably zero.”
However, the market may have set a different price. The so-called Trump trade, or the assumption that certain industries and markets would benefit if Trump were elected, has been gaining traction recently.
Canaccord’s Mueller believes the IRA will likely become slimmer if Republicans control the White House, Senate and House of Representatives.
“In my view, some of the low-hanging fruit will be targeting residential and commercial green investment tax credits,” he said.
StockStory aims to help individual investors beat the market.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X @ines_ferre.
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