Sunny Outlook for Solar Power

10/09/2020 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

IBISWorld reported that solar industry revenue in the U.S. grew 36% last year (to $10 billion) and that number is expected to more than double to $23 billion by 2025, notes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Moreover, industry consolidation is speeding up, with the top five module manufacturers expected to ship 65% to 70% of total product this year.

All of that is boosting the fortunes of JinkoSolar Holding (JKS), which, unbeknownst to most investors, is the largest solar panel producer in the world. In its second quarter, the company posted EPS of $1.20 and revenues of $1.2 billion, trampling estimates and up solidly from a year ago.

And its global business is booming, with a recent agreement to supply bifacial modules — which produce solar energy from both sides of the panel and generate 40% more power than current mainstream utility products — in Chile and in Vietnam.

JinkoSolar has been highly profitable for years, but the stock has been a nothing burger, bobbing and weaving for a long time.

But recent trading looks decisive — after a multi-month rally toward multi-year highs, JKS went ballistic on enormous volume both before and after earnings. Yes, it’s extended and could shake out a bit, but it’s unlikely we’ll see a huge retreat given the blastoff.

SolarEdge Technologies (SEDG) aims to disrupt the entire electricity grid along with traditional power generation. This company offers power optimizers, solar inverters and cloud-based monitoring systems that increase energy output.

Its single phase inverters (which convert DC power generated by solar panels into AC power used in homes and businesses) dramatically reduce heavy cooling elements, resulting in a smaller and lighter unit for simplified shipping and storing, not to mention easy one-person installation.

The firm also pairs its inverters with DC power optimizers, creating “smart” modules which maximize power generation, providing a significant cost savings over most microinverter systems. Its innovations have allowed it to capture an impressive 61% of the U.S. inverter market last year (up from just 5% in 2013!).

The firm’s rapid growth has been accompanied by a doubling of shipments in the last two years, along with gross margins north of 30%. With a combined global market share of 20%, SolarEdge has plenty of room for future expansion. It’s a great story.

Technically, SEDG was halved during the March panic, but the post-bottom comeback has been nothing short of amazing. The stock has zoomed to new highs on many days of big volume. We think any pullback will offer a solid entry.

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