First Solar and SolarEdge Technologies hold big upside over the next 12 months, Goldman Sachs says, as the investment firm named SEDG and FSLR stock among top solar picks for 2023.
"While solar equities outperformed in 2022 vs. (the Russell 2000), stocks are still around 20% below early 2021 peak levels and valuations remain below pre-IRA (Inflation Reduction Act) levels," Goldman Sachs analyst Brian Lee said in a note to clients late Sunday.
He added: "This is despite fundamentals having significant positive momentum that we see setting up for healthy upside across many pockets of the group into 2023, particularly in the backdrop of improving margins and policy tailwinds (not uncertainties)."
The analyst prefers solar stocks with utility-scale exposure vs. residential. He also likes those with domestic exposure vs. non-U. S. names.
Solar Stocks Get Buy Rating
Lee rates FSLR stock a buy with a 12-month price target of $231. He called First Solar "the biggest beneficiary of the IRA" with "outsized exposure to U.S. utility-scale solar." First Solar makes a type of thin-film technology that has a far lower negative impact on the environment than silicon-based modules made in China.
The Goldman Sachs analyst rates SEDG stock a buy with a price target of $416. "We expect SEDG to continue to benefit from the strong demand growth in EU and energy storage segments," he said. Additionally, Lee expects margins to continue to improve heading into 2023. Based in Israel, SolarEdge develops solar inverters for photovoltaic arrays.
In addition, Lee rates Array Technologies and Enphase Energy as buys. Array provides utility-scale solar tracker technology. Enphase develops and manufactures solar microinverters.
Lee calls ENPH stock "one of the best execution stories in our coverage," with a $379 price target. He has a $29 target on ARRY stock, citing improving execution as well as margins.
Lee's buy calls also include Sunrun, Maxeon Solar Technologies and Stem. His sell rating calls include Canadian Solar and Jinko Solar.
FSLR Stock Rises, SEDG Stock Falls
Shares of First Solar rose 1.1% to 156.77 on the stock market today. FSLR stock offers a 149.50 buy point off support at the 10-week moving average.
Solar Edge shares shed 3.4% to 309.58 Monday. SEDG stock fell back below a 311.58 buy point. On a weekly chart, SEDG shares show a cup base with a 376 buy point.
ARRY stock dived 6.1% to 20.45 Monday and ENPH stock gained 0.5% to 305.01.
Growth stocks led Monday's broad market sell-off as recession fears persist.
FSLR stock has a near-perfect RS Rating of 98 out of 99. That means it has outperformed 98% of all stocks in IBD's database over the past year. That compares to an RS Rating of 97 each for Enphase Energy and Array Technologies, as well as an 86 for Solar Edge.
Amid the IRA tailwinds, ENPH stock and SEDG stock are both on the IBD 50 list of top growth stocks. And FSLR stock ranked No. 6 on IBD's Best ESG Companies for 2022 list, published in October.
