Piper Sandler Bullish On Residential Solar Stocks, Predicts Biden Would Extend Federal Tax Credit

Solar energy stocks have been shining bright in 2020, and a Piper Sandler analyst said Wednesday that it's it’s not too late to get in on the solar boom.

The Solar Analyst: Piper Sandler analyst Kashy Harrison initiated coverage of three solar stocks:

• Sunnova Energy International Inc NOVA, Overweight rating, $37 price target.
• SunPower Corporation SPWR, Overweight rating, $20 price target.
• Sunrun Inc RUN, Neutral rating, $70 price target.

Piper Sandler's Solar Stock Takeaways: The solar sector is a disruptive growth industry with a falling cost structure, Harrison said in a Wednesday initiation note. 

From 2010 to 2019, the residential solar industry grew at a compound annual growth rate of 57%, but the analyst said residential solar has still only penetrated between 3% and 4% of the addressable market.

“Growth will be underpinned by the societal onus for environmental sustainability, increasing consumer demand for power resiliency, and deflationary battery storage tailwinds with CA continuing to serve as the critical market.”  

Related Link: BofA Upgrades Sunnova On Hopes For Solar Tax Credit Extension

Solar stocks have been on the rise in 2020 due in part to momentum behind the Democrat Joe Biden's presidential campaign. The U.S. federal solar investment tax credit is being phased down from 30% in 2019 to 10% in 2022 and beyond.

Yet Harrison said industry experts expect Biden to reenact and extend the 30% rate should he secure the presidency.

Piper Sandler sees plenty of room for residential solar stocks to run given declining costs of capital and impressive growth potential in the industry that should drive valuation upside.

Benzinga’s Take: Investors remember how much energy stocks, prison stocks, gun stocks and other groups rallied after Donald Trump won the 2016 election.

Traders should anticipate solar stocks will be among the equities that could be on the move if Biden continues to gain momentum heading into next month’s election.