5 Best Solar Stocks to Buy in October 2021

The solar energy sector is among the most promising investing themes as the world pivots towards a low carbon future. Meanwhile, after the sharp run-up since Joe Biden’s 2020 election, most of the solar stocks have significantly come off their 2021 highs.

Given the positive long-term forecast for the sector, some of the solar stocks appear good buys. Here are the five best solar stocks that you can buy in October.

1. SunPower (NYSE: SPWR)

SunPower stock is down about 10% in the year but looks set to recoup its losses in today’s trading session. The stock is up sharply in premarkets today after its addition into the Midcap 400 index. Notably, addition into an index leads to a buying spree as the funds that are indexed to the index have to necessarily buy the stock in the proposition of its weightage in the index.

Over the last year, a lot of indices have added green energy stocks. Last year, the S&P 500 added Enphase Energy and Tesla, and the latter became the largest company ever to be added to the prestigious index. Names like Fisker have also been added to Russell indices. Adding green energy stocks to the index makes them more contemporary considering the global pivot towards renewable energy.

SunPower is a good solar stock to buy in October

Meanwhile, SunPower looks like a good solar stock to buy in October. The company provides solar solutions for homes and businesses and is well-positioned to benefit from the increased demand for solar energy. The valuations also look reasonable and SPWR stock trades at an NTM (next-12 months) PE of 49.8x which is not far from the lowest multiples that we’ve seen over the last year. The company’s revenues are expected to rise 28% each in 2021 and 2022. The company is expected to maintain a strong growth trajectory over the next many years looking at the growing demand for solar.

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2. SolarEdge Technologies (NYSE: SEDG)

SEDG stock is down almost 15% in the year. The company makes inverters and power optimizers. These products help improve the DC power to AC power conversion of solar panels. Most Wall Street analysts are bullish on the stock and it has 17 buys, five hold, and three sell ratings. Its median target price of $340 is a premium of over 27%.

The company’s sales are expected to rise 35% this year and 30% next year. The adjusted EBITDA is expected to rise 47.5% and 38% over the period. The stock trades at an NTM PE multiple of 43.5x which looks quite attractive looking at the valuation of other solar stocks.

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3. First Solar (NYSE: FSLR)

FSLR stock is down around 5% so far in 2021 which is relatively better than some of the other solar companies. Wall Street analysts have a mixed opinion over the stock. Last month, Morgan Stanley reiterated its underweight rating on FSLR stock.

Wall Street analysts have a mixed opinion over First Solar stock

“Significant U.S. policy uncertainty has favored FSLR, but we think the stock prices in too large a benefit, and restrictions are likely to be more narrow than expected. We see risk to near-term earnings from Covid-19 disruptions and longer-term margin risk from price competition,” said Morgan Stanley in its release.

However, Bank of America has a different view and reiterated the stock as a buy in August. “We find confidence around largely intact pricing through ’24 outlook today as a key point to watch (even some moderation as inflation) would ensure sustained wide margin benefits vs peers and vs perceptions of otherwise commoditized business,” said Bank of America analysts in their note.

FSLR stock forecast

Looking at the consensus estimates, most Wall Street analysts have a hold rating on the stock, and its median target price of $101 is only about a 4.8% upside over current prices. That said, FSLR is among the best solar stocks to buy and play the transformation in the energy sector.

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4. Array Technologies (NYSE: ARRY)

Array Technologies went public last year only. However, the stock has been among the worst-performing stocks in 2021 and is down almost 57%. The company is a play in the solar energy industry and makes ground mounting systems for large solar energy projects. Earlier this year, Goldman Sachs had listed the stock as among the best renewable energy companies in North America.

What makes Array a good solar stock to buy?

ARRY is a reasonably valued solar stock with an NTM EV-to-sales multiple of around 2.7x which is below many of the peers. The company’s sales are expected to rise only about 2.7% this year but the growth is expected to rise to 35.1% next year. The company’s EBITDA is expected to jump 145% to $154 million in 2022.

The strong growth outlook and reasonable valuations make ARRY stock among the best solar stocks to buy in October. The stock’s median target price of $25 implies a potential upside of 37% from these price levels, While the stock has been out of favor with markets amid the sell-off in green energy stocks, it looks like a good solar stock to buy now after the massive crash.

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5. NextEra Energy Partners (NYSE: NEE)

While most other solar stocks are trading with a YTD loss, NEE stock is up around 6%. It was also among the North American renewable energy stocks that Goldman Sachs is bullish on. NextEra is the world’s largest producer of wind and solar energy. Its median target price of $90 implies an upside of around 15% from these levels.

NextEra is not a solar stock but a play on renewable energy

NextEra is not a pure-play solar stock. The company acquires and manages a portfolio of clean energy. However, it is among the best ways to play the increasing share of renewable energy in the global energy mix.

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