Solar Energy Surges: Could Friday's Price Action Mark A Reversal For Solar's Underperformance?

Solar energy companies have been among the market’s biggest underperformers in recent weeks but traded well in the green on Friday. Have solar’s woes hit an inflection point?

Solar’s Performance: Investors have been bearish on solar energy in 2024. The solar-tracking Invesco Solar ETF TAN is down over 25% year to date; solar’s performance in the past month ranks last in the technology industry.

The largest components have fared poorly following lackluster earnings. Rising material costs and political uncertainty aren’t helping, either.

Enphase Energy Inc ENPH shed over 30% of its market cap from Sept. 24 to Thursday. Canadian Solar Inc CSIQ is down over 18% while shares of First Solar Inc FSLR dropped nearly 20% in that timeframe.

Array Technologies Inc ARRY has performed, comparatively, even in the past month, though is down over 61% in 2024.

What Happened Friday: Solar stocks were among the market’s top performers on Friday, according to Benzinga Pro.

Bloomberg reported on Friday morning that China could address oversupply concerns by curbing industry production. A new policy could speed up the retirement of less-efficient polysilicon plants; polysilicon is a key component in the solar supply chain.

The market quickly reacted:

• Shares of Canadian Solar closed the day up 9.83%.
• Shares of Enphase Energy closed the day up 3.37%.
• Shares of Array Technologies closed the day up 4.38%.
• Shares of First Solar closed the day up 1.24%.

What’s Next?: An obvious catalyst (or hindrance) for investors looking to invest in the solar energy industry is the 2024 United States presidential election between Vice President Kamala Harris and former President Donald Trump.

Harris, the Democratic nominee, has supported reducing greenhouse gas emissions through the adoption of green energy. Trump, the Republican nominee, has previously falsely claimed that climate change is a hoax. A Trump presidency would likely benefit mining, oil and gas companies and present an obvious headwind for solar.

Perhaps much of solar’s underperformance in recent weeks can be chalked up to growing market confidence that Trump will prevail come November. Solar stocks previously performed well during times of momentum for Harris.

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Image: Midjourney