Darkness Clouds The Solar Sector, But History Says 2024 Could Be a Turning Point

The renewable sector caught an early solar eclipse last week (and it isn’t even Apr. 8, 2024, yet). Last Thursday, SolarEdge Technologies (NASDAQ:SEDG) gave a dire warning for the solar industry, saying it experienced “substantial unexpected cancellations and pushouts of existing backlog” in Europe (Barron’s).

With inventory piling, the solar panel parts supplier gave third-quarter sales forecasts that are well below previous expectations — sending the solar industry spiraling:

• SolarEdge lost nearly a third of its value with downgrades from analysts at Morningstar, Goldman, and Deutsche Bank, who cut its revenue growth estimates and price targets in half.
• The contagion rocked other solar stocks like Enphase Energy (NASDAQ:ENPH) and First Solar (NASDAQ:FSLR) — which are found in the largest US solar ETF, Invesco Solar ETF (NYSE:TAN), which is down nearly 40% since the start of the year.

Not easy being green: Higher interest rates have manufactured lower demand throughout the Renewables Sector — impacting capital-intensive companies like utility giant NextEra Energy (NYSE:NEE) or wind turbine manufacturer Siemens Energy (OTC:SMEGF), both down nearly 40% this year.

Solar stocks set as solar use rises

According to a Nature Communications study published last week, over 50% of US electricity will come from renewables by 2028, while over half of all US energy will come from solar alone by 2043.

• In 2022, the US installed a record amount of small-scale solar, pushing solar’s share of US electricity to a record high of 4.7%, up from 3.9% in 2021.
• Major state installations might help make 2023 even bigger. Texas and California will install 41% of all new domestic utility-scale solar installations in the US — expected to produce 11.9 gigawatts of new capacity.

Icarus flew too close: Renewable stocks have crashed back down to Earth from their pandemic highs, and while data points to the inevitable rise of renewable energy, timing is incredibly difficult to predict. Per Reuters, there have been two periods (2010-2012 and 2014-2016) where the Invesco Solar ETF had negative returns — but had risen 125% and 52% in the years after. If history repeats, 2024 could turn out to be a strong year for the industry.