Solar Stocks Just Got Demolished!
Solar stocks took a nasty hit after Trump’s “big beautiful bill” passed the House.
Of course, we’re not surprised, and actually have been anticipating this. Because if this legislative package becomes law, it would remove the 30% federal tax credit for rooftop solar installations and end the investment and electricity production tax credits for solar power facilities.
Although the bill still has to get through the Senate, we really don’t know whether or not these tax credits will be saved. Some of the solar stocks most likely to be impacted include …
- Sunrun (NASDAQ: RUN)
- Complete Solaria (NASDAQ: SPWR)
- Enphase Energy (NASDAQ: ENPH)
- SolarEdge Technologies (NASDAQ: SEDG)
- Canadian Solar (NASDAQ: CSIQ)
- First Solar (NASDAQ: FSLR)
- JinkoSolar (NYSE: JKS)
To be sure, these companies won’t go gently into that good night. Even in the absence of these tax credits, solar is cost competitive enough to survive without them. Most of these companies will just have to adjust to much tighter margins. And that’s going to drastically impact valuations.
Of course, it should be understood that, globally, the solar industry is still a beast. And its existence doesn’t rely solely on the whims of government policy in the U.S.
Solar Stocks: A Global Juggernaut
Policy support in the EU, India and China – three of the largest energy markets in the world – remains strong, and will continue to facilitate the rapid growth of solar in the coming years.
By 2040, 40% of electricity demand in the EU will be met by solar. Today, it’s around 11%. That’s a CAGR of nearly 9%.
In China, by 2040, 30% of the country’s electricity will come from solar. Today it’s 8%. That’s a CAGR of 9.2%.
And in India, by 2040, as much as 49% of electricity demand will come from solar. Today it’s around 19%. That’s a CAGR of 6.5%.
Despite what many people in the U.S. believe, there is a world outside of our borders. And in some of the largest global energy markets, solar continues to grow faster than anything else.
Of course, that doesn’t mean solar stocks aren’t going to get thrashed if this bill does get through the Senate with those tax credit eliminations in place. If that happens, you could see solar stocks fall another 15% to 20% overnight.
The upside, of course, is that this could push some of these solar stocks down into oversold levels. Particularly the ones that have significant exposure in India and the EU, such as JA Solar and ReNew Energy Global (NASDAQ: RNW).
We’ll continue to monitor this legislation and provide you with necessary guidance as it plays out on the Hill.
Jeff
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