Investing in Solar Stocks
The transition to cleaner sources of energy is well underway, with many nations pledging to hit net zero in the next couple of decades. In order to do so, renewable energy capacity will need to increase in order to help phase out fossil fuels.
In this article, we will analyse the prospect of investing in solar energy, highlighting 2 of the best solar stocks to watch in 2024.
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Investing in Solar Energy Stocks
After accounting for very little of global electricity supply a decade ago, wind and solar energy capability has increased rapidly in recent years, accounting for a combined 13.4% of global electricity generation in 2023.
Solar energy capacity is forecast to continue increasing throughout the remainder of the current decade, as the world transitions away from harmful fossil fuels and towards cleaner renewable energy sources.
This won’t be a quick transition, and it won’t be cheap either, but in order to achieve net zero by 2050, it does need to happen. Therefore, for those looking for a long-term investment opportunity, solar stocks could be an option.
However, anyone who chooses to invest in solar energy stocks should be prepared for volatility along the way.
The Best Solar Stocks to Watch
As solar energy output has increased in recent years, so too has the number of companies operating in this industry. So, what are the best solar stocks to buy? In the following sections, we will take a look at 2 solar energy shares to watch in 2024.
First Solar
First Solar is a US-based company which manufactures solar panels and provides utility-scale photovoltaic power plants. Founded in 1999, it is a leader in the industry and has been one of the top-performing solar stocks in recent years.
What differentiates First Solar from many of its competitors is their pioneering technology. First Solar uses highly efficient thin-film modules for its solar panels, which perform more efficiently in unideal weather conditions than the traditional technology.
Another thing which sets the company apart from many competitors in this industry is its robust balance sheet. At the end of the second quarter, First Solar had a net cash balance of $1.2 billion and has achieved this position whilst successfully expanding production.
However, something to bear in mind is that the solar power company is benefitting greatly from the Inflation Reduction Act, which rewards companies investing in clean energy. The resultant tax credits and subsidies are providing a significant boost to the company’s operating income. The potential problem here is that, presumably, at some point these tax credits and subsidies will end, which will impact First Solar’s bottom line.
Nevertheless, with inflation falling back to target levels in the US, First Solar should stand to benefit from a much anticipated lowering of interest rates.
Enphase Energy
Enphase Energy is a solar energy company which originally gained success through its innovative solar microinverters. Solar microinverters sit on the back of each solar panel and convert the direct current (DC) produced by the panel into grid compatible alternating current (AC).
Enphase Energy, which primarily manufactures products for residential customers, have subsequently added battery storage and electric vehicle (EV) chargers to its list of products. These additional products allow Enphase to potentially generate more revenue from each installation.
Like First Solar, Enphase has a healthy looking balance sheet. At the end of the second quarter, Enphase had cash, cash equivalents and marketable securities of $1.65 billion, which outstripped its total debt. However, unlike First Solar, sales and operating income have dipped significantly in 2024.
Enphase is also benefitting greatly from the Inflation Reduction Act, which is boosting margins. Again, this is something to consider, as if these subsidies are removed, it will have a negative impact on the solar company’s bottom line. Nevertheless, Enphase should stand to benefit from the potential lowering of interest rates.
Solar Energy ETF
Instead of investing in individual solar stocks, another option for investors looking to gain exposure to the solar industry is to look for an Exchange-Traded Fund (ETF) which focuses on companies operating in the solar industry.
An example of such a solar energy ETF is the Invesco Solar ETF, which tracks an index composed of solar power stocks.
How to Invest in Solar Energy
An investing account from Admiral Markets allows you to buy shares in the solar stocks examined in this article! In order to get started, follow these steps:
- Open an Invest.MT5 account and log in to the Dashboard.
- Open the web trading platform.
- Search for a solar power company to invest in and click the symbol to open a price chart.
- Create a new order, enter the number of shares and click ‘Buy’ to send your order to the market.
Investing with Admiral Markets
With an Invest.MT5 account, you can buy shares in more than 4,500 stocks and over 200 ETFs from around the world. Click the banner below in order to register for an account today:
FAQ
Is the solar industry a good investment?
With the world transitioning to cleaner energy sources, solar energy is one of the industries which stands to benefit from this. However, that doesn’t mean that every solar energy company will succeed. Before investing in solar energy stocks, it is important to conduct independent research to ensure that any potential investment aligns with your investing goals.
Who is the leader in solar energy?
China is the world’s leading producer of solar energy, accounting for more than a third of total global solar generation and capacity in 2023.
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