AdrianHancu
The solar industry has been facing significant headwinds from fluctuating trade policies and proposed changes for certain tax credits under the Trump-backed spending bill making its way through Congress.
We asked Seeking Alpha analysts Oliver Rodzianko and Victor Dergunov for their takes on what lies ahead for this emerging sector.
Oliver Rodzianko: Residential-focused solar stocks like Sunrun (NASDAQ:RUN) and Enphase (NASDAQ:ENPH) face the most near-term pain due to the abrupt elimination of residential investment tax credits, or ITCs, while utility-scale firms like First Solar (NASDAQ:FSLR) and Array Technologies (NASDAQ:ARRY) face more manageable risks due to the phasing out of ITCs.
I’m a First Solar (NASDAQ:FSLR) shareholder, and I’m treating my investment as a short-term cyclical play. Early phasing out of utility-scale ITCs actually means there could be more near-term demand as developers rush to lock in favorable prices with producers. This is a time to readjust take-profit targets and to not forget the inherent cyclicality of solar power investment returns.
In the long run, of course, solar power will continue to dominate the energy landscape with strong and growing demand, but that trajectory will be volatile, aligning with shifting policy and the macroeconomic climate.
Victor Dergunov: The solar industry is in a lot of trouble here. Rates remain high with no easing in sight. High home improvement loan rates are keeping demand less than optimal. In addition, tariffs are impacting margins, and the U.S. government’s phase out of solar tax credits will further impact demand moving forward.
We need lower interest rates, but we are already seeing prominent bankruptcies in the solar segment and more will likely materialize. Many companies may not make it, but the ones that remain may grow to dominate the solar industry in future years and decades. Several companies I like in this space include First Solar (NASDAQ:FSLR), Tesla (NASDAQ:TSLA) and Enphase (NASDAQ:ENPH).