After the United States presidential election results were released for the entire market to see, certain stocks behaved in ways that let all investors know where the next opportunity set might be. While the bulk of the bullish price action centered around the industrial and manufacturing sectors, other stocks experienced sharp sell-offs.
These sell-offs might seem like an undeniable opportunity today, such as those in the renewable energy sector, solar stocks to be specific. However, investors should still be weary of buying these recent dips as other fundamental and “bigger picture” factors at play could pose a potential headwind that needs to be taken care of first.
Such a headwind is the price of crude oil refusing to break out on the news or the dollar index still being high enough to keep energy prices from rising. As long as these two don’t cooperate, renewable energy sources won’t be as attractive when sitting next to cheap gas and oil. Still, when they turn, investors should watch for First Solar Inc. (NASDAQ: FSLR), Nextracker Inc. (NASDAQ: NXT), and Enphase Energy Inc. (NASDAQ: ENPH) under that scenario.
Fresh Analyst Upside for First Solar Stock
Analyst ratings should be taken with a grain of salt, as they typically aren't willing to back a losing stock to avoid being on the wrong side of history and hurting or risking their careers simultaneously. Knowing how careful analysts are when making their ratings and valuations, today's view of First Solar stock should mean all the more.
Particularly the reiterated Buy rating from those at Guggenheim, this time placing a $335 a share valuation on First Solar stock, implying there is a net upside of up to 72.3% inherent in the stock from where it trades today.
Considering that the stock now trades at only 63% of its 52-week high, the emphasis is on analyst willingness to remain bullish on the name. To justify these bold views for the future of First Solar stock, these same analysts have forecasted up to $5.5 in earnings per share (EPS) for the company in the next 12 months.
These projections call for a near doubling in profits compared to today's $2.91 EPS, which should give investors a chance to double their money through an ensuing rally as well. As it turns out, analysts weren't the only ones willing to take an optimistic view of the stock.
Those at BNP Paribas recently boosted their holdings in the solar company by as much as 0.9%, bringing their net position to a high of $434.9 million today, or 1.6% ownership in the company. Institutional interest coming in the days after the election could mean a shift in sentiment for solar stocks.
Nextracker Bears Are Fleeing Their Positions
While not much, the 5% decline in short interest for Nextracker stock over the past month serves as additional evidence for investors to consider that maybe some bullish momentum is starting to build up in the sector. This is especially the case considering the stock’s recent price action.
After giving up an additional 9% in the past five days and trading down to 64% of its 52-week high, a trend that should have attracted more short sellers to push the downside momentum. Given that the opposite happened, investors need to take this as a sign that new buyers may be willing to come into the space for the coming quarters.
Over the past 12 months, investors have seen up to $1.8 billion of institutional capital enter the company, another factor that should be kept front and center when considering a potential new buy in Nextracker stock.
Even though the stock’s price has fallen to bearish levels, the market is still willing to pay a premium for the stock, knowing that this is one bet that could pay off well when oil and the dollar begin to move accordingly. By trading at a price-to-book (P/B) multiple of 4.6x today, Nextracker commands a premium over the energy sector’s average 3.6x P/B today.
Enphase Energy Stock Trading at the Biggest Discount
While peers trade at roughly 40% off their yearly highs, Enphase stock offers investors the widest discount to its highs from the group. By trading at only 47% of its 52-week highs, investors should be both aware and careful of this discount.
The fear starts to fade as the recent price targets set by analysts at J.P. Morgan Chase are taken into account. A reiterated Overweight rating came along with a $120 price target on this solar stock. The stock would have to rally by as much as 80% from where it trades today to prove these new valuations right.
Knowing that these targets are within reality, Baillie Gifford decided to boost their position in Enphase stock by 0.9% as of November 2024. While it may not seem like much on a percentage basis, the group now holds up to $716.9 million worth of the stock today, or 4.7% ownership in the company.
The biggest discount in Enphase Energy stock could quickly become the biggest upside potential for investors to consider under the right circumstances.