While the stock market surged on the heels of a wild Election Day 2020, red-hot solar stocks went dim, with The Invesco Solar ETF (NYSEARCA:TAN) shedding as much as 6%, and many headline solar stocks â€” like First Solar (NASDAQ:FSLR) and SolarEdge (NASDAQ:SEDG) â€” dropping more than 10%.
Because the election will likely end with a divided government.
Specifically, Democrats failed to flip the Senate. The Blue Wave that was supposed to ripple across Washington, will not happen. Any sweeping changes that Biden had promised on his platform â€” including bigger rebates for solar â€” are now unlikely to materialize.
But this is all just near-term noise.
The reality is that the solar energy megatrend did not hinge on rebates. Bigger rebates wouldâ€™ve been nice. But far from necessary. Instead, driving the solar energy megatrend over the next few years will be falling costs (solar energy costs have dropped 70% over the past 10 years, and solar is now the cheapest electricity in the world), improving technology (26% of solar systems will be paired with energy storage capability by 2025, versus just 4% in 2019), and rising consumer demand (46% of U.S. homeowners are seriously thinking about adding solar panels to their homes, up from 40% in 2016).
Those secular drivers are much,Â muchÂ bigger than rebates â€” meaning the solar energy megatrend will continue to accelerate over the next few years, even without a Blue Wave.
So buy the dip in solar stocks.
Specifically, buy the dip in these solar stocks:
Solar Stocks to Buy on the Election Dip: JinkoSolar (JKS)
At the top of this list of solar stocks to buy on the dip is arguably the best turnaround story in the solar industry.
For years, JinkoSolar has been written off as just another low-end, commoditized Chinese solar module manufacturer, in a crowded and struggling solar energy market, with a marginally profitable business model and cyclical, volatile demand.
But, over the past 12-plus months, JinkoSolar has pulled off a compelling turnaround which broadly implies that this company will emerge as a premium and highly profitable leader in the soon-to-be-enormous global solar market. This turnaround is centered around three things:
- JinkoSolar has pivoted from making cheap, low-efficiency multicrystalline solar modules (56% of shipments in 2018), to making premium, high-end monocrystalline solar modules (99% of projected shipments in 2020) â€” and their new premium solar panels feature a record-high 24.8% energy conversion efficiency (typical efficiencies for these cells average around 20%).
- The company has leaned into its cheap China-centric and technologically advanced manufacturing process to sell these top-notch solar panels at market-low prices. Jinkoâ€™s signature line of Tiger Pro Monofacial solar panels carry a levelized cost of energy (LCOE) of 2.8 cents per kilowatt hour, versus 3 cents standard for monocrystalline solar cells and 12 cents average for all U.S. electricity.
- Jinkoâ€™s monocrystalline pivot has dramatically improved the companyâ€™s profitability profile. No longer is this a sub-15% gross margin company with skimpy operating margins. Now, gross margins are near 20% and operating margins are above 5%.
Big picture: JinkoSolar is in the first inning of an enormous turnaround which will end with this company being a top-tier premium solar player with big profit margins. Ultimately, that means JKS stock is a compelling long-term investment opportunity.
One of the highest-quality solar stocks to buy on the dip is SunPower.
At a high level, SunPower is a $3 billion downstream, integrated solar energy distribution and storage leader in the U.S. and Canada that provides an end-to-end, consumer-facing solution which includes solar project origination, financing, installation, and service/maintenance through a connected software app.
In other words, the company doesnâ€™t make solar panels and invest in upstream R&D. Rather, the company just sells, finances, and installs solar panels and accompanying panel management software into residential and commercial end-markets.
Much like the bull thesis on JKS stock, the bull thesis on SPWR stock comes down to three things:
- SunPower has a big first moverâ€™s advantage in many of the worldâ€™s leading solar markets, like California, where SunPower has 9% market share in residential solar and 50% share in new home construction.
- SunPower sells and installs the marketâ€™s best solar panels, which feature market-leading energy conversion efficiency, temperature resistance and materials warranty.
- The company is aggressively expanding into residential solar energy storage solutions with its SunVault storage box, meaning the company is increasingly turning into an all-in-one solar energy capture and storage powerhouse with a big addressable market and a compelling value prop.
Connecting the dots, SunPower projects as North Americaâ€™s number one premium solar panel and storage installer for the foreseeable future. That means this company has a really bright future â€” and that bright future is being discounted by the market, with SPWR stock trading at just 2X forward sales while most of its peers trade at 10X forward sales.
As an undervalued, high-quality asset in the booming solar space, SPWR stock could easily rise 10X over the next few years.
Solar Stocks: Maxeon Solar (MAXN)
Last, but not least, on this list of solar stocks to buy on the Election dip is Maxeon Solar.
As we said above, SunPower sells and installs the worldâ€™s most efficient residential and commercial solar panels. But SunPower doesnâ€™t make them. A small, $450 million solar panel manufacturer by the name of Maxeon Solar makes them.
Maxeon is a brand-new play in the solar world. The company used to be a part of SunPower. Then, in late 2019, SunPower decided to break apart its upstream manufacturing business (Maxeon) from its downstream installation business (SunPower), so that as the solar industry grows, matures, and consolidates over the next few years, SunPower and Maxeon can each craft out a niche for themselves through value chain specialization.
Makes a ton of sense.
So, today, Maxeon is a new market entrant that specializes on manufacturing the worldâ€™s best solar panels, which feature the marketâ€™s highest energy conversion efficiency, the marketâ€™s lowest degradation rate, and the marketâ€™s best durability and longest shelf life.
From head to toe, these are the best solar panels the world has to offer â€” and while Maxeon has an exclusive agreement to sell those solar panels to SunPower in the U.S. and Canada over the next few years, the company also has free reign to expand internationally with new customers and new geographies.
To that end, Maxeon has an opportunity to turn into the premium technology backbone of the global solar energy market over the next few years.
If the company does do that, then MAXN stock will quickly put this Election volatility behind it, and soars by leaps and bounds in the 2020s.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.Â
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