Despite macroeconomic challenges, the solar industry is undergoing rapid growth. However, continued progress relies on implementing well-designed federal and state policies to support and drive the industry’s expansion.
Amid this backdrop, while I think buying fundamentally strong solar stock Canadian Solar Inc. (CSIQ) could be wise, JinkoSolar Holding Co., Ltd. (JKS) and Maxeon Solar Technologies, Ltd. (MAXN) could be added to one’s watchlist.
Solar energy is the fastest-growing power source in the U.S., and analysts predict that U.S. solar installations will quadruple in the next decade.
The Solar Panel Market is projected to reach $256.44 billion by 2029, with a growth rate of 7.3% during the forecast period.
The solar energy industry has experienced significant technological advancements, making it more efficient, reliable, and cost-effective. As a result, investments have substantially increased, with over $2.5 trillion expected to be invested in renewable energy.
Solar power is a key source in reducing greenhouse gas emissions and addressing climate change. Ongoing innovation in the sector is driving the growth of the global solar panel market, fuelling its expansion.
The market for Transparent Solar Cells was valued at $13.8 million in 2022 and is projected to grow at a CAGR of 19.4% from 2022 to 2029, reaching $76.6 million.
However, the industry faces challenges, including high cost, solar dependency, and space and storage constraints.
Let’s take a closer look at the fundamentals of the featured stocks.
Stock to Buy:
Canadian Solar Inc. (CSIQ)
Headquartered in Canada, CSIQ, together with its subsidiaries, designs, develops, manufactures, and sells solar ingots, wafers, cells, modules, and other solar power and battery storage products in Asia, the Americas, Europe, and internationally. The company operates through two segments, Canadian Solar Inc. (CSI) Solar and Global Energy.
On June 26, 2023, CSIQ announced that its subsidiary, Recurrent Energy, has secured a €150 million multicurrency facility with Santander Corporate & Investment Banking (Santander CIB). This funding will enable Recurrent Energy to expand and retain more asset ownership in specific markets. The facility consists of a €30 million and $20 million term loan, along with a $110.5 million revolving credit facility spanning three years.
On June 15, 2023, CSIQ built a solar module manufacturing facility in Mesquite, Texas. With an annual output of 5 GW, the $250 million investment will create 1,500 skilled jobs. Production is expected to start by late 2023. This is Canadian Solar’s first manufacturing plant in the United States, following successful operations in other countries.
In terms of the trailing-12-month EBIT margin, CSIQ’s 6.87% is 59.4% higher than the 4.31% industry average. Likewise, its 3.97% trailing-12-month net income margin is 101.3% higher than the 1.97% industry average. Furthermore, the stock’s 7.93% trailing-12-month Capex/sales is 244% higher than the 2.30% industry average.
CSIQ’s revenues for the first quarter ended March 31, 2023, increased 36.1% year-over-year to $1.70 billion. Its income from operations increased significantly to $145.60 million.
The company’s net income rose significantly year-over-year to $106.83 million. In addition, its gross profit increased 75.8% year-over-year to $318 million ($239.72 million). Also, its EPS rose 750% year-over-year to $1.19.
For the quarter ending June 30, 2023, CSIQ’s EPS and revenue are expected to increase 40.2% and 7% year-over-year to $1.50 and $2.47 billion, respectively. Over the past six months, the stock has gained 21.3% to close the last trading session at $36.90.
CSIQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B grade for Growth. Within the Solar industry, it is ranked first out of the 15 stocks. To see CSIQ’s rating for Momentum, Stability, Sentiment, and Quality, click here.
Stocks to Watch:
JinkoSolar Holding Co., Ltd. (JKS)
Headquartered in Shangrao, the People’s Republic of China, JKS, together with its subsidiaries, engages in the design, development, production, and marketing of photovoltaic products. The company offers solar modules, silicon wafers, solar cells, recovered silicon materials, and silicon ingots. It also provides solar system integration services and develops commercial solar power projects.
On June 27, JKS announced that it had delivered more than 220,000 Tiger NEO bifacial 72 modules to the 123 MW Verila Solar Power Plant in Bulgaria.
“It is one of the largest projects ever built in Europe using TOPCon bifacial modules, and JinkoSolar is very proud to be a part of such an important milestone for our industry,” Mr. Frank Niendorf, General Manager of JinkoSolar Europe, commented.
On June 14, 2023, JKS officially launched its Second-Generation High Voltage Energy Storage Battery in the European market. The upgraded product, JKR-B1250~2750-A, is designed for residential and small commercial applications.
The product offers wireless interconnection, high charging, and discharging current, and IP65 protection for enhanced safety. JinkoSolar emphasizes sustainability through automated production, reduced energy consumption, and improved quality control.
In terms of the trailing-12-month return on common equity, JKS’s 8.53% is significantly higher than the 0.63% industry average. Likewise, its 1.22% trailing-12-month Return on Total Assets is significantly higher than the 0.06% industry average.
However, its trailing-12-month gross profit margin of 15.37% is 68.6% lower than the industry average of 48.99%, while its trailing-12-month levered FCF margin of negative 21.37%, compared with the industry average of 6.98%.
JKS’s total revenues for the first quarter ended March 31, 2023, rose 58% year-over-year to RMB23.33 billion ($3.40 billion). Its gross profit increased 81.5% year-over-year to RMB4.04 billion ($588.42 million). Also, EPS came in at RMB3.74 ($0.54).
Street expects JKS’s EPS and revenues for the quarter ending June 30, 2023, to increase 13% and 43% year-over-year to $1.26 and $4.02 billion, respectively.
Over the past year, the stock has slumped 32.8% to close the last trading session at $43.17.
JKS’ POWR Ratings are consistent with this uncertain outlook. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. It has a C grade for Momentum, Sentiment, and Quality.
It is ranked #2 in the same industry. Click here to see JKS’s ratings for Growth, Stability, and Value.
Maxeon Solar Technologies, Ltd. (MAXN)
Headquartered in Singapore, MAXN designs, manufactures, markets, and sells solar panels and related solar system components worldwide. The company provides interdigitated back contact and shingled solar cells and panels under the SunPower brand. It offers its products to dealers, project developers, system integrators, distributors, resellers, and residential and small-scale commercial customers.
On June 14, 2023, MAXN and Samsung are collaborating to integrate MAXN’s SunPower One energy solution into Samsung’s SmartThings platform. This partnership aims to help homeowners increase energy independence, save money, and contribute to a cleaner environment. SmartThings is a certified Smart Home Energy Management System focused on sustainability.
On June 1, 2023, MAXN announced significant product advancements. Firstly, the company achieved a world-record module aperture efficiency of 24.7% for its Maxeon 7 panel, verified by the U.S. National Renewable Energy Laboratory.
Secondly, MAXN improved the efficiency of its Interdigitated Back Contact (IBC) products, with Maxeon 6 panels reaching 23% efficiency and already being installed in Europe. Additionally, a more efficient version of the Maxeon 3 panel, with 24% efficiency, will be available for shipment in Q4 2023.
MAXN’s trailing-12-month ROCE, ROTA, and ROTC of negative 118.52%, 14.84%, and 14.55%, compared with the industry averages of 0.63%, 0.06%, and 1.78%, respectively.
For the fiscal first quarter ended April 2, 2023, MAXN’s total revenues rose 42.7% year-over-year to $318.33 million. Its adjusted EBITDA rose substantially year-over-year to $30.99 million. In addition, its EPS came in at $0.46.
Analysts expect MAXN’s revenues for the quarter ending June 30, 2023, to increase 58.5% year-over-year to $377.38 million. However, its EPS for the quarter is expected to be negative. Over the past month, the stock has slumped 4.2% to close the last trading session at $27.38.
MAXN’s uncertain outlook is reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. It also has a C grade for Sentiment, Value, Quality, and Momentum.
It is ranked #3 in the Solar industry. To see MAXN’s ratings for Stability and Growth, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
CSIQ shares rose $0.10 (+0.27%) in premarket trading Friday. Year-to-date, CSIQ has gained 19.42%, versus a 15.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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