Solar Stocks Bounce Back as Senate Disagrees with Clean Energy Cuts

Solar stocks like Sunrun (RUN), SolarEdge Technologies (SEDG), and Enphase Energy (ENPH) bounced back on Friday after taking a big hit the day before, which happened after the House passed President Trump’s tax and spending bill. This is because analysts say that the bill could severely damage the U.S. residential solar industry. Indeed, Wells Fargo, led by five-star analyst Michael Blum, noted that the House bill is especially bad for Sunrun, Enphase, and SolarEdge, as it changes which tax credits apply to leased solar systems.

Instead of using the 48E credit that runs through 2028, leased systems would now use the shorter 25D credit, which ends in 2025. As a result, this would hurt Sunrun’s cash flow and increase costs for customers, which would make solar leases less attractive. While Array (ARRY) and Nextracker (NXT) would also be impacted, demand for utility-scale solar remains strong. In addition, First Solar (FSLR) is less affected since the bill keeps 45X credits, but some tax benefits tied to domestic panel use may disappear.

Nevertheless, the Senate will now review the bill, and some Republican senators said that they want to change the deep cuts to the Inflation Reduction Act. The bill ends rooftop solar tax credits this year and shortens credits for larger solar and wind projects to 2028, unless 5% of the total cost is spent within 60 days. Interestingly, Guggenheim’s five-star analyst, Joseph Osha, estimates that about 70% of the residential solar market relies on leasing or financing. It is also worth noting that the bill blocks most clean energy tax credits from being transferred, which could make it harder for manufacturers to raise money.

Which Solar Stock Is the Better Buy

Turning to Wall Street, out of the six stocks mentioned above, analysts think that RUN stock has the most room to rally. In fact, RUN’s average price target of $11.46 per share implies more than 65% upside potential. On the other hand, analysts expect the least from SEDG stock, as its average price target of $14.57 equates to a loss of 13%.

See more RUN analyst ratings