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Solar companies begin reporting first quarter results next week, and Wall Street analysts say the recent pullback in the sector allows investors to get in on the cheap.
“The bar is low (for a change); expect beats in [residential],” Goldman Sachs said in a research note, adding that the “significant underperformance in solar equities in recent months has created an attractive buying opportunity for the group.”
“We believe we are in a unique period in which there are excellent buying opportunities,” Morgan Stanley said in a note to clients.
Firms’ top picks include Sunnova and Enphase.
The Invesco Solar ETF, which tracks the sector, gained 234% in 2020 amid widespread investor enthusiasm for renewable energy stocks.
But the exchange-traded fund is now down about 17% year to date.
Experts point to several factors fueling the pullback, including fears over what rising rates could mean for the industry’s cost of capital, a broad market rotation out of growth and into value and concerns about stretched valuations.