The Biden-Harris administration recently announced a $56 million investment in solar manufacturing and recycling innovation. Furthermore, First Solar Inc. (FSLR), the largest solar panel manufacturer in the United States, announced that it would build a new solar panel manufacturing facility in the United States in response to the Inflation Reduction Act, which encourages domestic manufacturing.
However, it is anticipated that the industry will continue to be constrained due to equipment shortages and supply chain bottlenecks. Additionally, over 75% of the polysilicon is produced globally by Chinese companies, posing a concentration risk to the solar industry.
So, while the long-term outlook for the solar industry remains positive, we believe that the industry's bleak short-term growth prospects make fundamentally weak solar stocks Sunrun Inc. (RUN), Array Technologies Inc. (ARRY), and Beam Global (BEEM) best avoided now.
Sunrun Inc. (RUN)
RUN designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels, racking, and generates solar leads for customers. In addition, the company provides battery storage and solar energy systems.
During the second quarter ended June 30, 2022, RUN’s total revenue increased 45.7% year-over-year to $584.58 million. However, its operating expenses increased 36.3% from the year-ago value to $739.89 million. Its operating loss grew 9.5% from the prior-year quarter to $155.31 million. The company reported a net loss of $209.76 million. Its loss per share amounted to $0.06.
Analysts expect RUN’s EPS to decline 89.7% in fiscal 2022 and 172.7% in the current quarter ending September 2022. The stock has declined 27.3% over the past year and 5.3% year-to-date.
RUN's POWR Ratings are consistent with this bleak outlook. The stock's overall F rating translates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RUN has been graded an F for Stability, Value, and Quality. Within the F-rated Solar industry, it is ranked #17 of 18 stocks.
To see additional POWR Ratings for Growth, Sentiment, and Momentum for RUN, click here.
Array Technologies Inc. (ARRY)
ARRY designs and sells solar tracking systems and related products in the United States and internationally. Its products include the single-axis solar tracking system DuraTrack HZ v3 and SmarTrack, a machine learning program that determines the best location for a solar array in real time to increase energy output.
ARRY’s revenue increased 116.2% year-over-year to $424.93 million for the second quarter ended June 30, 2022. However, its operating loss increased 1092.3% from the year-ago value to $6.84 million. Its net loss surged 171.1% from the prior-year quarter to $14.96 million. Its loss per share grew 150% year-over-year to $0.10.
Its EPS is expected to decline 5.6% per annum over the next five years. The stock has declined 5.8% over the past year and 16.7% over the past month.
ARRY's weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The stock has an F grade for Stability and a D for Value and Quality. In the same industry, it is ranked #11.
In addition to the POWR Ratings grades I have just highlighted, you can see the AARY rating for Momentum, Growth, and Sentiment here.
Beam Global (BEEM)
BEEM is a cleantech company that creates, develops, engineers, manufactures, and sells renewable energy-powered products for outdoor advertising, energy security, and outdoor media.
BEEM's revenue increased 75.3% year-over-year to $3.72 million for the second quarter ended June 30, 2022. However, its operating loss grew 71.4% from the prior-year quarter to $2.82 million. The company’s net loss surged 70.7% from the year-ago value to $2.80 million. Its loss per share grew 55.6% year-over-year to $0.28.
Street expects its EPS to decline 39.2% in the current year and 26.3% in the current quarter ending September 2022. The stock has declined 54.4% over the past year and 11.9% over the past month.
BEEM’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade for Quality and Sentiment and a D for Value. BEEM is ranked last in the same industry.
Click here to see the additional POWR Ratings for BEEM (Momentum, Stability, and Growth).
RUN shares were trading at $30.58 per share on Friday afternoon, down $1.92 (-5.91%). Year-to-date, RUN has declined -10.85%, versus a -21.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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