The US solar industry is expected to experience a substantial expansion of 32 gigawatts (GW) in 2023, as per a report by the Solar Energy Industries Association (SEIA). This growth rate indicates a 52% increase in the market compared to last year, which had seen a 13% decline. The report also predicts that the total operational solar capacity in the United States will rise from the current 153 GW to 375 GW by 2028. This expansion is attributed partly to the investment incentives offered under the US Government's 2022 Inflation Reduction Act (IRA), which allocates approximately $370 billion to clean energy and climate change initiatives, including tax incentives for renewable energy developers. SEIA president Abigail Ross Hopper commented:
“The United States is now a dominant player in the global clean energy economy and states such as Florida, Texas, Ohio and Georgia are at the forefront of this job growth and economic prosperity. The solar and storage industry is delivering abundant clean energy that is generating tens of billions of dollars of private investment, and this is just the tip of the iceberg.”
John Berger, CEO of Sunnova Energy International Inc. (NYSE:NOVA), joinedCNBC in August 2023 and commented that the solar industry is seeing a ‘residential boom’. He noted that apart from solar panels, residential customers are buying batteries, heat pumps, generators, and load management systems. Berger observed that the shift toward alternative energy is not limited to households – it is also evident in the automotive sector. He attributed alternative energy being significantly cheaper as the reason for this shift.
On the other hand, according to BloombergNEF, polysilicon production has been slightly reduced, which has stabilized prices, but there is still surplus supply expected in the second half of 2023. Competition among Chinese manufacturers and high module inventory in Europe and other major markets are putting pressure on margins throughout the photovoltaic value chain. In August 2023, the price of standard solar modules reached a historic low of 16.5 cents per watt, and it is expected to decrease further by year-end. China is aggressively installing large amounts of solar capacity, surpassing their local targets, and South Africa is set to add 5 gigawatts of capacity due to persistent power outages. A notable trend is the increasing pairing of solar plants with energy storage, with this practice mandated in various Chinese provinces and incorporated into auctions in many other countries.
Some of the most undervalued solar stocks – which means stocks that are currently trading at a price lower than their intrinsic or fundamental value – to buy according to hedge funds include NextEra Energy, Inc. (NYSE:NEE), Enphase Energy, Inc. (NASDAQ:ENPH), and Sunrun Inc. (NASDAQ:RUN).
Most Undervalued Solar Stocks To Buy According To Hedge Funds
Solar panel workers installing a new farm for clean energy generation.
Our Methodology
We made an extensive list of the most popularly traded solar stocks and shortlisted 11 stocks with P/E ratios under 35 and the highest hedge fund sentiment. While some P/E ratios might seem high, they are lower than the green and renewable industry average P/E of 83, which was calculated by NYU Stern. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the second quarter of 2023. The list is arranged in ascending order of the number of hedge fund investors in each firm.
Most Undervalued Solar Stocks To Buy According To Hedge Funds
Emeren Group Ltd (NYSE:SOL) specializes in the development, construction, and operation of solar energy initiatives. The company is involved in the creation of community solar installations and the sale of project rights worldwide. On October 10, Emeren Group Ltd (NYSE:SOL) declared the successful grid connection of its first solar storage venture in Ningbo, China. This project, with a capacity of 1.2 MWh, is supported by a private, extended power purchase agreement with a local energy consumer.
According to Insider Monkey’s second quarter database, 10 hedge funds were bullish on Emeren Group Ltd (NYSE:SOL), compared to 6 funds in the prior quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 2.14 million shares worth $8 million.
In addition to NextEra Energy, Inc. (NYSE:NEE), Enphase Energy, Inc. (NASDAQ:ENPH), and Sunrun Inc. (NASDAQ:RUN), Emeren Group Ltd (NYSE:SOL) is one of the most undervalued solar stocks to invest in.
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is involved in the design, production, and marketing of photovoltaic products, including solar modules, silicon wafers, solar cells, silicon materials, and silicon ingots. The company also offers solar system integration services and engages in commercial solar power project development. It is one of the most undervalued solar stocks according to hedge funds. On October 30, JinkoSolar Holding Co., Ltd. (NYSE:JKS) reported a Q3 GAAP EPS of $2.53 and a revenue of $4.36 billion, beating market estimates by $170 million. Revenue for the period increased 63% compared to the prior-year quarter.
According to Insider Monkey’s second quarter database, 12 hedge funds were bullish on JinkoSolar Holding Co., Ltd. (NYSE:JKS), compared to 16 funds in the preceding quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest stakeholder of the company, with 1 million shares worth $46 million.
Canadian Solar Inc. (NASDAQ:CSIQ) is engaged in the creation, development, production, and sale of solar materials and battery storage items worldwide. Canadian Solar Inc. (NASDAQ:CSIQ) is one of the most undervalued solar stocks to monitor. On October 30, the company said that it intends to invest $800 million in constructing a solar photovoltaic cell manufacturing facility in Jeffersonville, Indiana. This facility is set to generate 5 GW of PV cells annually, roughly equivalent to producing around 20,000 high-power modules per day, with production scheduled to start by the end of 2025. These cells will be utilized in Canadian Solar Inc. (NASDAQ:CSIQ)’s 5 GW module assembly plant in Mesquite, Texas.
According to Insider Monkey’s second quarter database, 16 hedge funds were long Canadian Solar Inc. (NASDAQ:CSIQ), compared to 17 funds in the last quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 1.46 million shares worth $56.5 million.
SunPower Corporation (NASDAQ:SPWR) is a solar technology and energy services provider offering solar, storage, and home energy solutions in the United States and Canada. The company offers post-installation monitoring and maintenance services, catering to homeowners and new home builders. It is one of the top undervalued solar stocks according to hedge funds. However, SunPower Corporation (NASDAQ:SPWR) reported a Q3 non-GAAP EPS of -$0.18 and a revenue of $432 million on November 1, falling short of $0.19 and $13.47 million, respectively.
According to Insider Monkey’s second quarter database, 17 hedge funds were bullish on SunPower Corporation (NASDAQ:SPWR), compared to 20 funds in the last quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 2.4 million shares valued at $23.6 million.
Daqo New Energy Corp. (NYSE:DQ) produces and distributes polysilicon to manufacturers of photovoltaic products in China. This polysilicon is utilized in the production of ingots, wafers, cells, and modules for solar energy applications. It is one of the most undervalued solar stocks to watch. On October 30, Daqo New Energy Corp. (NYSE:DQ) reported Q3 non-GAAP earnings per share of $0.59 and a revenue of $484.8 million. Daqo’s Q3 2023 production of polysilicon reached 57,664 metric tons, up from 45,306 metric tons in Q2 2023. Meanwhile, polysilicon sales in Q3 2023 amounted to 63,263 metric tons, surpassing the 51,550 metric tons recorded in the previous quarter.
According to Insider Monkey’s second quarter database, 22 hedge funds were long Daqo New Energy Corp. (NYSE:DQ), compared to 21 funds in the prior quarter. Lei Zhang’s Hillhouse Capital Management is the largest stakeholder of the company, with 2 million shares worth $80.8 million.
Shoals Technologies Group, Inc. (NASDAQ:SHLS) offers electrical balance of system (EBOS) solutions and components for solar, battery energy, and electric vehicle charging applications in the United States. On October 11, Goldman Sachs upgraded Shoals Technologies Group, Inc. (NASDAQ:SHLS) to a Buy rating with a $28 price target. The upgrade is based on the company's potential for increased gross margins and its attractive valuation. Shoals Technologies Group, Inc. (NASDAQ:SHLS)’s effective operations and margin expansion have resulted in positive earnings surprises in recent quarters, which Goldman Sachs views as significant for the stock due to a correlation with gross margin trends since its 2021 IPO.
According to Insider Monkey’s second quarter database, 24 hedge funds were bullish on Shoals Technologies Group, Inc. (NASDAQ:SHLS), compared to 34 funds in the prior quarter. Todd J. Kantor’s Encompass Capital Advisors is the leading position holder in the company, with 4.10 million shares worth nearly $105 million.
Like NextEra Energy, Inc. (NYSE:NEE), Enphase Energy, Inc. (NASDAQ:ENPH), and Sunrun Inc. (NASDAQ:RUN), Shoals Technologies Group, Inc. (NASDAQ:SHLS) is one of the most undervalued solar stocks to monitor.
ClearBridge Investments made the following comment about Shoals Technologies Group, Inc. (NASDAQ:SHLS) in its Q3 2022 investor letter:
“Shoals Technologies Group, Inc. (NASDAQ:SHLS) manufactures electrical balance of systems (EBOS) components for ground-mounted solar projects and has been gaining market share for quality of service and price. Shoals is also starting to develop an EV charging infrastructure business. We previously owned Shoals and sold our position earlier this year as supply chain issues were negatively affecting margins. Improving supply chain dynamics should support the stock, and tax credits for clean energy production and investment in the IRA should further act as a tailwind for Shoals.”
