Five Solar stocks for your portfolio from Roth

It could be a better year up ahead for the solar energy industry, and Roth Capital Partners has investors covered, shining a light on five top picks from the sector. 

Roth analysts Philip Shen and Justin Clare delivered a Sustainability Report on Thursday, providing their outlook on solar and saying sentiment in the US residential solar and utility scale solar segments should be inflecting in 2023. Shen and Clare said the news flow from residential solar loan volumes is expected to come in negative, at least for the first half of the year, while the utility solar news should get less negative as the year goes on. Higher interest rates impacting loan originations along with supply chain issues were listed as factors.

“Our recent checks suggest the segment may experience ~10 per cent year-over-year growth in 2023 vs. our prior view of 10-15 per cent year-over-year growth. This compares with some lofty prior 2023 expectations at SPI of up to 40 per cent year-over-year growth,” Shen and Clare wrote in their January 5 report.

As for their stock picks, the analysts like the following. (All projected returns are as of the January 5 publication date of the Roth Sustainability report.)

Stock: Array Technologies (Array Technologies Stock Quote, Charts, News, Analysts, Financials NASDAQ:ARRY)

Roth rating: Buy

Roth’s 12-month target price: $35.00

Projected return: 80 per cent

New Mexico-headquartered Array Technologies designs and manufactures solar tracking systems for use in utility-scale and large-scale commercial solar installations. Shen and Clare pointed out in a December update on Array that the company is now negotiating longer-term contracts to lock in their large customers, while management sees the industry entering a ‘hyper-growth’ phase in 2023 with 40 per cent year-over-year growth.

Stock: Shoals Technologies Group (Shoals Technologies Group Stock Quote, Charts, News, Analysts, Financials NASDAQ:SHLS)

Roth rating: Buy

Roth’s 12-month target price: $40.00

Projected return: 62 per cent

Based in Portland, Tennessee, Shoals is a market leader in the design and manufacture of EBOS solutions for utility-scale projects and was founded in 1996. In a December note, Shen and Clare said management expects to see margin stability and strength through 2023 with gross margins at between 38 and 40 per cent, supported by a mix-shift away from comparatively lower-margin components business. 

Stock: FTC Solar (FTC Solar Stock Quote, Charts, News, Analysts, Financials NASDAQ:FTCI)

Roth rating: Buy

Roth’s 12-month target price: $9.00

Projected return:  237 per cent

Shen and Clare like FTC Solar, which provides solar tracker systems, technology, software and engineering services, saying in a December note on the company that the stock is at an attractive entry point. The analysts pointed to a ‘meaningful’ 500 MW contract won this past September, while FTC’s balance sheet and liquidity remain healthy, according to Shen and Clare

Stock: Altus Power (Altus Power Stock Quote, Charts, News, Analysts, Financials NYSE:AMPS)

Roth rating: Buy

Roth’s 12-month target price: $12.00

Projected return: 66 per cent

Connecticut-based Altus Power develops, owns and operates large-scale roof, ground and carport-based photovoltaic and energy storage systems along with electric vehicle charging facilities. Shen and Clare like the name, saying in a November company note AMPS is on track to deliver significant capacity expansion this year and looks to make further progress in developing programmatic relationships with larger portfolio customers.

Stock: Sunnova Energy (Sunnova Energy Stock Quote, Charts, News, Analysts, Financials NYSE:NOVA)

Roth rating: Buy

Roth’s 12-month target price: $51.00

Projected return: 180 per cent

Sunnova, which supplies solar-generated electricity to residential customers in the US, mostly through 25-year power purchase agreements, should experience some tailwinds in 2023, according to Shen and Clare, who in a November note said the rising rate environment is making NOVA’s lease offerings more attractive to dealers looking to get on NOVA’s platform.