Roth Names Top Solar Picks Before Earnings, Sees Buying Opportunity

In a new report, Roth Capital Partners analyst Philip Shen discusses the solar power industry ahead of its Q2 earnings season. Overall, Shen sees the recent Greece and China-related downward move in solar stocks as a buying opportunity, as the fundamentals of the industry remain solid.

Strong Q2

Roth is predicting acceleration in residential growth in Q2, a positive indicator for SolarCity Corp SCTY. Shen believes that recent developments in the market, including the $2.2 billion M&A deal between Vivint Solar Inc VSLR and SunEdison Inc SUNE and the imminent IPO of Sunrun, indicate that investor sentiment for residential solar has flipped positive.

Solid Fundamentals

Shen sees the 30 percent Solar Investment Tax Credit (ITC) driving “robust” residential growth for the next six quarters. Roth is predicting 185 MW of installation from SolarCity in Q2, ahead of the company’s guidance of 180 MW.

Catalysts

According to Shen, there are two potential positive catalysts for solar stocks in coming months. First, an extension of the ITC would be a pleasant surprise for solar companies and would likely trigger an extremely positive market reaction.

Second, a resolution to the delay in SolarCity’s asset-backed securities (ABS) deal would also likely serve as a positive catalyst. While Shen notes that Roth is only “modestly concerned about the delay,” the market does not respond well to uncertainty.

Top picks

In addition to SolarCity, Roth likes SolarEdge Technologies Inc SEDG because of its cost discipline and its recent share gains. Roth names Hannon Armstrong Sustainable Infrastructure Capital Inc HASI as its top YieldCo pick and Canadian Solar Inc CSIQ as its top module manufacturing stock.