Oct 13, 2021 (Baystreet.ca via COMTEX) -- Beaten down solar and hydrogen sectors have been on the mend over the past few days as investors bet that the ongoing global supply crunch, including oil and gas shortages, will lift the renewables sector. The solar sector has been out of favor in the current year, mainly on concerns about steep valuations leading to Invesco Solar Portfolio ETF (nysearca:TAN) tanking 20.8% in the year-to-date.
However, Wall Street has started warming up to the sector once again, saying ongoing supply chain constraints to lift product prices.
"The solar industry will continue to be constrained by poly supply in 2022 with prices staying high. We are expecting 25% growth in PV installations if module prices correct to 2020 levels of ~RMB 1.6/W, unleashing demand suppressed by high prices in 2021 and stimulating sales for inverters and trackers," Jefferies analysts have said.
Jefferies has tapped Daqo New Energy /zigman2/quotes/206327009/composite DQ -2.95% as its top solar energy selection, with DQ shares rocketing 11% higher after the analysts assigned it a potential upside to $208-good for a nearly 4x jump over current levels.
Jefferies' comments have lifted the entire sector, with the TAN ETF up 5.3%. Other leading solar names have been making strong moves, too: Sunworks Inc. /zigman2/quotes/208800639/composite SUNW -5.27% +13.4%, SunPower Corp. /zigman2/quotes/200243424/composite SPWR -5.16% +11.5%, JinkoSolar Holdings /zigman2/quotes/207601099/composite JKS -5.90% +8.3%, Maxeon Solar Technologies /zigman2/quotes/220015328/composite MAXN -5.09% +8.3%, SolarEdge Technologies Inc. /zigman2/quotes/207754270/composite SEDG -2.02% +7.9%, Sunrun Inc. /zigman2/quotes/205021014/composite RUN -3.97% +7.2%, Array Technologies Inc. /zigman2/quotes/221735763/composite ARRY -4.05% +6.2%, Enphase Energy Inc. /zigman2/quotes/207948472/composite ENPH -3.01% +6.1%, Canadian Solar Inc. /zigman2/quotes/205481506/composite CSIQ -2.45% +5.4%, Sunnova Energy International Inc. /zigman2/quotes/213414922/composite NOVA -4.14% +5.3%, and First Solar Inc. /zigman2/quotes/209356097/composite FSLR -2.18% +5.1%.
Despite the supply chain disruptions, solar companies have continued posting strong growth numbers.
Enphase reported Q2 non-GAAP EPS of $0.53, which beat Wall Street's consensus by $0.11; GAAP EPS of $0.28 beat by $0.02 while revenue of $316.05M (+151.8% Y/Y) beat by $4.82M.
Meanwhile, First Solar reported Q2 GAAP EPS of $0.77, topping Wall Street's consensus by $0.23 while revenue of $629M (-2.1% Y/Y) beat by $8.55M. For the full year 2021, the company says it expects EPS of $4.0-$4.6 vs. a consensus of $4.04, on revenues of $2.875B-$3.1B vs. $2.93B consensus. First Solar plans to build a new 3GW per year panel factory in Ohio at a cost of $680M. The company says it seeks to "reshore" manufacturing that has moved outside the United States, bolstered by President Biden's ambitious clean energy goals. CEO Mark Widmar says the company's three Ohio plants combined would produce panels that could generate 6 GW of power annually by 2025, more than half of all solar panels the company estimates will be produced annually in the U.S.
With oil and gas prices constantly taking out multi-year highs and experts saying oil prices could hit an all-time high of $200 per barrel, hydrogen companies have come into the limelight again as companies look for cheaper alternatives.
The leader in the space, Plug Power /zigman2/quotes/205453512/composite PLUG -6.20% , has been ramping up its use of hydrogen as a fuel.
PLUG shares have surged nearly 15% over the past five trading sessions and jumped to their highest in six weeks as Citigroup analyst P.J. Juvekar maintains his Buy rating and $35 price target after visiting the company's facilities and coming away impressed with the company's plans to expand its capabilities to make hydrogen gas while also lowering costs.
Juvekar says Plug Power will achieve its goal to manufacture green hydrogen for ~$6/kg. Though still considerably more expensive than the current cost of diesel fuel, it's on par with the cost of hydrogen derived from natural gas reformation, responsible for about 95% of the hydrogen produced in the United States. The analyst also says the proposed infrastructure bill is a big plus for the likes of Plug Power since it includes $8B for hydrogen-production hubs and $1B for green electrolyzer development in the 2022-26 period.
Earlier this year, SK Group made a $1.5B capital investment in Plug Power to accelerate the expansion of the hydrogen economy in Asia.
And now the companies are going at it full throttle: Plug Power and South Korea conglomerate corporation SK Group have announced they have formed a joint venture to build a gigafactory with mass capacity for hydrogen fuel cells and electrolyzer systems in South Korea by 2024, The JV will supply domestic and certain overseas markets in Asia and also distribute liquefied hydrogen produced by SK to ~100 charging stations nationwide. Plug Power will own 49% of the JV with SK owning the rest.