2021 has been the year of focus on energy transition. Interestingly, however, solar stocks still remained unloved, as evident from the Invesco Solar ETF that’s down 20% year-to-date. But that’s set to change in 2022, as per JPMorgan’s Mark Strouse.
Strouse’s remarks on CNBC’s ‘The Exchange’
On CNBC’s “The Exchange”, Strouse attributed the underperformance in solar stocks to several “disruptions” that changed the sentiment faster than these companies could strengthen their fundamentals.
Just like in 2020, there was disruption from the pandemic, we had supply chain disruptions, we had a global shipping issue, we had company-specific semiconductor polysilicon issues, as well as the geopolitical tensions between the U.S. & China.
According to Strouse, the underperformance does not, however, represent muted growth in this sector. Solar shipments, he added, were up 27% on a year-over-year basis in 2021, which proves that a shift to renewable energy is indeed picking up pace.
Strouse’s top picks within the solar space
Within the solar space, Array Technologies, Sunrun, and Sunnova Energy are his top picks. All three are in the red for the year. Stating his reasons for being bullish on these, he said:
These companies are generating cash now. These two stocks have been relatively weak compared to overall coverage. In 2022, we think they’ll see improving margins. These companies are transitioning from just solar installation companies to adding more and more services over time.
Besides business from homeowners, he sees a move into electric vehicle charging as particularly promising for these companies. Last month, Array Technologies expressed confidence that its margin will grow from the present 4.8% to roughly 20% in the back half of 2022.
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