5 Best Solar Stocks to Buy in December 2021

While solar stocks were strong in 2020, they have whipsawed in 2021. The year started off well for solar stocks and Joe Biden’s decision to rejoin the Paris Climate Deal led to a rally in all green energy stocks.

However, the sector came under pressure thereafter, partially due to a sell-off in growth names. There was some momentum last month after the COP26. With 2021 now drawing to a close what are the five best solar stocks that you can buy in December?

1. ­Maxeon (NYSE: MAXN)

Maxeon was spun off from SunPower in 2020 only and makes solar panels. The stock has had a dismal ride as a publicly-traded company. After a weak 2020, it has continued to fall in 2021 also and is currently down 40% for the year. Meanwhile, Bank of America finds value in this beaten-down solar stock.

“We believe too much of the focus and the recent stock performance has been tied to the sentiment and expectations around the BBB (Build Back Better),” said Bank of America analyst Dumoulin-Smith. He added, “MAXN still has an underlying core of the business that is slated for a turnaround by YE22. The brokerage believes that MAXN offers a good entry point after the crash and the market concerns over the balance sheet are unfounded.

“While some investors have expressed concerns over the cash constraints, we believe that the core business is self-sufficient over the next twelve months in terms of the cash needs, which de-risks the balance sheet,” said the note.

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Bank of America finds MAXN a good solar stock to buy

According to the estimates compiled by Koyfin, Maxeon’s revenues are expected to rise 56% in 2022 and 25% in 2023. The projected growth looks attractive and Maxeon could be among the beneficiaries if the Build Back Better bill passes.

2. Enphase Energy (NYSE: ENPH)

Enphase Energy stock is up 22% for the year which is slightly below the S&P 500’s returns. That said, while the S&P 500 is near record highs, ENPH is down 24% from its 52-week highs and is in a bear market territory. However, analysts see the stock moving higher and its median target price of $280 is a 31% premium over current prices. Wall Street analysts have a consensus buy rating on the stock and it has 21 buys, 9 hold, and one sell rating.

ENPH is a good solar stock for the long term

Enphase Energy is a good solar stock for the long term. It is the world’s leading supplier of micro inverter-based solar and battery systems. The company has shipped over 39 million microinverters which is a remarkable achievement.

Meanwhile, ENPH is also expanding in the EV charging industry, and earlier this year it announced the acquisition of ClipperCreek, which provides EV charging solutions. There has been a splendid rally in EV charging stocks after the $1 trillion bipartisan infrastructure bill was passed. Analysts expect the company’s revenues to rise over 40% in 2022. The stock trades at an NTM (next-12 months) PE multiple of 77x which looks reasonable looking at the expected growth.

ENPH is a fast-growing company and is expanding both organically as well as inorganically. If you are looking at a fast-growing solar stock at reasonable valuations, ENPH looks like a good bet.

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3. First Solar (NYSE: FSLR)

First Solar stock is trading flat for the year. The stock had risen in the first half of November amid optimism over the infrastructure bill. However, it soon pared gains in line with other solar stocks. The recent crash is a good opportunity to own this quality solar stock. Consensus estimates call for an upside of 20% over the next 12 months even as most analysts rate the stock as a hold.

First Solar is a financially strong solar company

First Solar has a strong balance sheet which makes it an attractive bet. The NTM PE multiple of 42.4x also looks reasonable. The company missed its third-quarter revenue estimates amid the supply chain issues. However, it maintained the 2021 net sales guidance and expects to post revenues between $2.88-$3.1 billion in the full year. It expects to deliver between 7.6-8 gigawatts of products in the full year. In the third quarter, the company shipped 2 gigawatts despite the supply chain issues.

Overall, FSLR looks like a good solar stock to add to your portfolio at these prices. Short-term volatility notwithstanding, the stock could deliver good returns over the long term.

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4. Sunnova (NYSE: NOVA)

Sunnova is among the worst-performing solar stocks in 2021 and has lost over a quarter of its market cap in the year. Meanwhile, Wall Street analysts see massive upside in the stock and its median target price of $56 is a premium of almost 70% over current prices. Of the 17 analysts covering the stock, 16 rate it as a buy or some equivalent while one analyst has a hold rating.

Wall Street finds NOVA a good solar stock to buy

NOVA is among the favorite solar stocks among analysts as is reflected in its ratings. Sunnova is among the leading residential solar and energy services providers in the US. The company is also diversifying into EV charging and in October it announced a partnership with ChargePoint.

NOVA is a fast-growing company and at the end of the third quarter, it had 176,900 customers., after it added 14,300 new customers in the quarter. NOVA is among the best solar stocks that you can buy at a discount in December.

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5. Altus Power (NYSE: AMPS)

Altus Power is the most recent solar play. The company has gone public through a reverse merger with CBRE Acquisition Holdings. The stock is trading only slightly above the SPAC IPO price. However, it looks like a good solar play for the long-term at these prices.

Altus Power offers located-sited solar generation, EV charging stations, and energy storage solutions. The company has generated over 900 million kWh of solar power. The SPAC merger valued the combined entity at $1.63 billion and a 2024 enterprise value-to-EBITDA multiple of 7.1x which looks quite reasonable.

With Altus trading near the SPAC IPO price, the valuations look quite reasonable. While many of the companies that went public through the SPAC merger trade way below the IPO price, Altus looks a good buy and could join the rank of companies that have created investor wealth post the merger.

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