Solar is the fastest-growing renewable energy in the world, reaching 1 TW of capacity in April. Here are three players investors must watch.
Solar installations represented half the 302 gigawatts (GW) of renewable energy capacity installed internationally in 2021. This was 70 GW more than the second biggest installer – wind. Global solar capacity doubled in the three years from 2018 and is forecast to double in capacity again by 2025. This represents a significant opportunity for investors to profit from the solar industry.
However, there are lots of stocks to choose from, which can confuse any beginner investor. To help, we have compiled a list of three top solar stocks that investors should add to their watchlist.
Canadian Solar, Inc.
Canadian Solar, Inc. (NASDAQ: CSIQ) designs, develops and manufactures solar cells, modules, and other solar power and battery storage products internationally. In the first quarter of 2022, Canadian Solar saw module shipments increase by 42% year-over-year (YoY). However, net income fell from $23 million to $9 million over the same period. This was due to higher raw material costs and the absence of U.S. anti-dumping and countervailing duty. Rising raw material costs are impacting all manufacturing companies due to the war in Ukraine and underinvestment in new mines. The strengthening of the U.S. dollar also caused a loss in currency exchange compared to a profit in previous quarters.
The company’s full-year guidance remains unchanged at total modular shipments of 20-22 GW and revenue of between $7 billion and $7.5 billion. This will be substantially greater than 2021’s figures of $5.3 billion on 14.5 GW of total modular shipments. This shows the company is experiencing rapid growth. However, unlike most other growth stocks on the NASDAQ, Canadian Solar’s share price has fallen by only 0.22% year-to-date. This indicates that while investors are pessimistic about the economy, they still have faith in the solar sector.
First Solar, Inc.
First Solar, Inc. (NASDAQ: FSLR) provides photovoltaic solar energy solutions for developers and system operators in the U.S and internationally. Unlike Canadian Solar, the company did not generate a profit in the first quarter of 2022. Instead, it made a net loss of $43 million compared with a profit of $131 million in the previous quarter, and $209 million the year prior. First Solar claimed this was due to decreases in solar module volumes sold, the average selling price of modules, and lower project revenues in Japan.
On a more positive note, First Solar has significantly less long-term debt than Canadian Solar, at just $236 million, down from $247 million in Q1 2021. This is less than one-tenth the size of Canadian Solar’s debt, lowering the interest rate risk for potential investors. The company has also increased capital expenditure for expansion from $90 million in Q1 2021 to $155 million in Q1 2022. This continues the trend of increasing investment over the past quarters, with total capital expenditures forecasted between $850 million and $1.1 billion in 2022. This should help the company expand its production capabilities over the coming years. Net bookings grew by 11.9 GW in just 60 days to 16.7 GW, showing significant demand for the company’s products.
JinkoSolar Holding Co., Ltd.
JinkoSolar Holding Co., Ltd (NYSE: JKS) is engaged in the design and production of photovoltaic products. Shipments of the company’s products were up 57% YoY to 8.39 GW in Q1 2022. The increase resulted in JinkoSolar becoming the first company in the industry to reach a total delivery milestone of 100 GW of solar modules. In the same period, revenue was up 86% to $2.33 billion, predominantly due to an increase in module shipments. However, like Canadian Solar and First Solar, profit margins were down due to rising raw material and shipping costs. This, in turn, pushed the net profit margin down to 0.2% from 2.8% the year prior. The company’s $2.66 billion in cash and cash equivalents protects against this deterioration in profits for the medium term.
Unlike the previously mentioned companies, JinkoSolar reported a net exchange rate gain in Q1 2022 compared to losses in the previous quarters due to the strengthening of the dollar. If the dollar continues to remain strong, it should safeguard JinkoSolar’s profit margins as, without this gain, the company would have made a net loss. Net debt increased by $10 million YoY but fell from $2.56 billion in December to $1.60 billion in March, showing management’s disciplined approach to the company’s finances.