3 Solar Stocks to Watch Amid Solid Installation Trend in US

Industry Overview - The Zacks Solar industry is divided into companies involved in designing and producing solar modules, panels, and cells, and those engaged in installing grids and solar power systems [2] - Photovoltaic (PV) solar accounted for 64% of new electricity-generating capacity added to the U S grid through Q3 2024, making it the dominant form of new generating capacity [2] Growth Trends - The U S solar industry installed 8 6 GWdc of new solar capacity in Q3 2024, a 21% year-over-year increase [3] - The U S Energy Information Administration expects 25 GW of solar generation capacity to come online in 2025, increasing total solar generation capacity to 153 GW from 128 GW in 2024 [3] Inflation Reduction Act Impact - The Inflation Reduction Act (IRA) has been a significant growth catalyst, with clean energy investments increasing 71% to $493 billion from H2 2022 to H1 2024 [4] - Utility-scale solar investments increased 56% from pre-IRA levels, and the IRA is expected to boost solar deployment by more than 40% from 2027 to 2032 [4] Challenges - Residential solar installations in the U S declined 39% year-over-year in Q3 2024 due to elevated interest rates and poor demand [5] - SEIA projects flat growth in the residential solar segment over the next five years due to power sector challenges, labor shortages, and interconnection delays [5] - China's dominance in solar module manufacturing, accounting for over 80% of global capacity, has led to oversupply and downward pressure on U S module prices [6] - Solar PV manufacturing costs in China are 20% lower than in the U S, posing a cost competitiveness challenge for U S manufacturers [6] Industry Performance - The solar industry has underperformed, with stocks collectively losing 30 3% over the past year, compared to a 4% growth in the Oils-Energy sector and a 24 4% surge in the S&P 500 [10] - The industry's current EV/EBITDA ratio is 12 90X, compared to the S&P 500's 18 32X and the sector's 3 36X [12] Key Companies - Nextracker shipped the first U S -manufactured solar trackers, achieving 100% domestic content value under the IRA, with a 14 2% improvement in fiscal 2025 sales estimates [15][16] - Canadian Solar executed agreements to deliver 188 MWh DC and 127 MWh DC battery energy storage systems, with a 21 2% improvement in 2025 sales estimates [18][19] - Enphase Energy announced initial shipments of its IQ Battery 5P, with a 27 7% improvement in 2025 sales estimates [20][21]