Susquehanna Upgrades SolarEdge, Enphase On Strong Residential Solar Growth

Although alternative energy stocks have recently been under pressure due to rising bond yields, the outlook for the sector has improved, according to Susquehanna International.

The Solar Stock Analyst: Biju Perincheril upgraded SolarEdge Technologies Inc SEDG and Enphase Energy Inc ENPH from Neutral to Positive, while keeping their price targets unchanged at $345 and $200, respectively.

The Solar Stock Takeaways: Susquehanna is raising its average estimates for solar capacity additions in the U.S. by around 1 gigawatt to about 25 GWs in 2021 to 2025, Perincheril said in the Friday upgrade note.

“The majority of the increase in our forecast comes from the residential sector (from 3.6 GW per year to 4.3), where ENPH and SEDG stand to benefit most. The strong sector outlook coupled with the pullback in the sector has made valuations more reasonable,” the analyst said. 

Enphase Energy: The analyst named Enphase Energy as the “top idea” among alternative energy names, saying the company is “the biggest beneficiary of the strong US [residential] market in our coverage group.”

He added, “We continue to see ENPH taking incremental market share in the US, and the introduction of its next-generation inverter – IQ8 – should ultimately result in better margins for the inverter business.”

SolarEdge Technologies: “SolarEdge is also a strong beneficiary of the strong US resi market, though it does have a relatively higher proportion of revenue coming from international and commercial segment,” Perincheril wrote.

The commercial sector’s recovery, with the reopening of global economies, “should be a good tailwind this year,” he added.