The solar industry has faced significant supply chain obstructions on its growth path over the past year. Also, most solar projects scheduled for 2022 could either be delayed or canceled due to rising materials and shipping costs.

Furthermore, according to the Solar Energy Industries Association and Wood Mackenzie, the U.S. solar industry is estimated to grow 25% less in 2022 than the previous forecast. Michelle Davis, the principal analyst at Wood Mackenzie, stated, “The U.S. solar market has never experienced this many opposing dynamics.”

Therefore, we think fundamentally weak solar stocks SolarEdge Technologies, Inc. (SEDG), First Solar, Inc. (FSLR), Sunrun Inc. (RUN), and Array Technologies, Inc. (ARRY) are best avoided now.

SolarEdge Technologies, Inc. (SEDG)

Headquartered in Israel, SEDG designs, develops, and sells direct current optimized inverter systems for solar photovoltaic installations worldwide. It offers inverters, power optimizers, communication devices, and smart energy management solutions.

On November 30, 2021, SEDG stock declined 5.2% after Morgan Stanley analysts downgraded it. 

SEDG’s revenues came in at $526.4 million for its fiscal third quarter, ended September 30, 2021, up 55.7% year-over-year. However, the company’s cash and cash equivalents came in at $526.59 million for the period ended September 30, 2021, compared to $827.15 million, for the period ended December 31, 2020. Its total current assets were  $1.55 billion, compared to $1.72 billion for the same period. Moreover, its goodwill amounted to $131.76 million, compared to $140.48 million, also for the same period.

Over the past month, the stock has declined  20.9% in price  to close yesterday’s trading session at $258.36.

SEDG’s POWR Ratings reflect its poor prospects. It has an overall D grade, which indicates a Sell. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, the stock has a D grade for Value and Sentiment. Click here to access the additional POWR Ratings for SEDG (Momentum, Growth, Stability, and Quality). SEDG is ranked #7 of 19 stocks in the F-rated Solar industry.

First Solar, Inc. (FSLR)

FSLR provides photovoltaic solar energy solutions in the United States, Japan, France, Canada, India, Australia, and internationally. It operates in two segments, Modules; and Systems. FSLR is headquartered in Tempe, Ariz.

FSLR’s net sales decreased 37.1% year-over-year to $583.5 million for the third quarter ended September 30, 2021. Also, its gross profit decreased 57.5% year-over-year to $124.58 million. And its net income decreased 70.8% year-over-year to $45.2 million.

Analysts expect FSLR’s revenue to decrease 6.1% in its fiscal year 2022. Furthermore, its EPS is expected to decline at  48.8% next year. Over the past month, the stock declined 20.9% in price to close yesterday’s trading session at $85.76.

FSLR’s POWR Ratings reflect its poor prospects. The stock has an overall D grade, which equates to a Sell in our POWR Ratings system. Also, it has an F grade for Growth and a D grade for Stability.

We have also rated it for Momentum, Value, Sentiment, and Quality. Click here to access all the FSLR ratings. FSLR is ranked #9 in the Solar industry.

Sunrun Inc. (RUN)

San Francisco-based RUN designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels and racking to customers. 

For the third quarter, ended September 30, 2021, RUN’s net loss came in at $241.33 million, compared to $85.4 million in the year-ago period. Its EPS decreased 60.7% year-over-year to $0.11. Also, its net intangible assets came in at $14.23 million, for the period ended September 30, 2021, compared to $18.26 million, for the period ended December 31, 2020.

Analysts expect RUN’s EPS to remain negative in its fiscal 2021 and 2022. Furthermore, its EPS is expected to fall 16.1% next year. Over the past month, the stock has declined  42.7% in price to close yesterday’s trading session at $31.44.

RUN’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Value, Stability, and Quality and a D grade for Sentiment.

We also have graded RUN for Growth and Momentum. Click here to access all of RUN’s ratings. RUN is ranked #17 in the Solar industry.

Array Technologies, Inc. (ARRY)

ARRY manufactures and supplies solar tracking systems and related products for customers in the United States and internationally. Its products include DuraTrack HZ v3, a single-axis solar tracking system, and SmarTrack, a machine learning software. ARRY is based in Albuquerque, N.M.

On December 16, 2021, Bragar Eagel & Squire, P.C.,a nationally recognized shareholder rights law firm, announced that it is investigating potential claims against ARRY on behalf of long-term stockholders following a class action complaint filed against the company on May 14, 2021.

ARRY’s net loss came in at $25.55 million for the third quarter, ended September 30, 2021, compared to $7.23 million in the previous period. Its loss per share was $0.24, compared to $0.06 in the year-ago period. Furthermore, its loss from operations came in at $16.13 million, compared to $5.11 million in the prior period.

ARRY’s revenue is expected to fall 1.7% in its fiscal year 2021. Its EPS is also expected to decline at 5.6% per annum over the next five years. Also, the stock has declined  37.8% in price over the past month to close yesterday’s session at 15.39.

ARRY’s POWR Ratings reflect its poor prospects. It has an overall D grade, which indicates a Sell. The stock has an F grade for Stability and Sentiment and a D grade for Value.

Click here to access the additional POWR Ratings for ARRY (Momentum, Growth, and Quality). ARRY is ranked #13 in the  Solar  industry.

SEDG shares rose $6.40 (+2.48%) in premarket trading Tuesday. Year-to-date, SEDG has declined -17.11%, versus a 24.01% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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