The sun is setting on solar stocks

Solar stocks are entering a dark age.

A few weeks ago, solar companies plunged on the news that the GOP tax and spending bill completely cut the clean energy credits that make installing rooftop panels cheaper and cover up to 50% of the cost for companies providing solar to homes.

But that was just the dress rehearsal. Back then, there was still hope that the Senate would make alterations to the bill that would spare solar.

Today, legislators amending the bill doubled down, slashing wind and solar credits originally implemented in the Inflation Reduction Act (IRA) in 2022. If the bill passes in its current form, the tax incentives will wind down in 2026 and be fully erased by 2028.

Clean energy stocks, understandably, plummeted. SunRun, which mostly provides solar and battery storage for residential homes, led the way down, sinking 40.04%. SolarEdge Technologies plunged 33.44%, while Enphase Energy dropped 23.97%, First Solar declined 17.89%, and Array Technologies fell 6.66%.

Wind companies such as NexEra Energy and Vestas also tumbled. Yet the amendments left room for some nuclear, geothermal, and hydropower renewable energy credits.

Is there any bright spot in the carnage?

There’s no way around it—there’s a dark cloud hanging over the industry.

But one ray of hope for solar investors is First Solar. Jefferies just upgraded the stock from “hold” to “buy” last week, arguing that it’s relatively cheap and that the tax credit cuts shouldn’t completely handicap its growth. “IRA is not as existential for utility-scale,” wrote equity analyst Julien Dumoulin-Smith.

At the same time, Jefferies downgraded SunRun from “hold” to “underperform,” given the company focuses on the residential solar market, which has relied heavily on the credits. The rest of the industry won’t fare much better, according to Jefferies, which also gave Enphase and SolarEdge “underperform” ratings.—LB