Solar energy stocks like Canadian Solar Inc. (NASDAQ: CSIQ), First Solar Inc. (NASDAQ: FSLR), and SolarEdge Technologies Inc. (NASDAQ: SEDG) are setting up in bullish patterns that could precede new rallies.
Despite some dropoff in solar capacity last year, the U.S. Energy Information Agency said more than half the new U.S. electric-generating capacity in 2023 will be solar.
On February 6, the agency said developers plan to add 54.5 gigawatts of new utility-scale electric-generating capacity to the U.S. power grid this year. Fifty-four percent of this capacity will be solar power.
Despite an upward trend in solar capacity in the past decade, utility-scale solar capacity additions fell 23% last year, vs. 2021. According to the EIA, “This drop in solar capacity additions resulted from supply chain disruptions and other pandemic-related challenges. We expect that some of those delayed 2022 projects will begin operating in 2023.”
It said that if all the capacity comes online this year as expected, “2023 will have the newest utility-scale solar capacity added in a single year.” It would more than double the capacity added in 2021.
Analyst estimates for many solar companies confirm that thesis. Canadian Solar is expected to report earnings growth of 51% this year. It wraps up 2022 reporting on March 16, before the opening, when it delivers fourth-quarter results. Wall Street expects earnings of $0.33 a share on revenue of $1.90 billion.
On the stock’s weekly chart, you can spot a cup-with-handle base that’s been forming since late August. The handle began taking shape in mid-January, with a current buy point just north of $44.
The cup with handle pattern frequently precedes a fresh rally in a bull market. The slight selloff in the handle generally occurs after a small number of investors take profits after a previous rally. However, in this case, the earnings on March 16 could be a catalyst for a significant price move.
S&P 500 component First Solar has a market capitalization of $17.54 billion. It’s an institutional favorite, as indicated by MarketBeat data, which indicates that nearly 81% of shares are held by institutional owners.
In the past 12 months, 381 institutional buyers accounted for $1.61 billion in inflows. Meanwhile, 224 institutional sellers accounted for $1.44 billion in outflows, so the scale is tipping in the right direction for bulls.
The company is due to deliver fourth-quarter results on February 28, with analysts expecting a loss of $0.18 a share on revenue of $875.36 million.
The stock has been finding support along its 50-day moving average, which can signal a holding pattern ahead of earnings. The fact that it’s maintained that support since January 19 shows that investors aren’t selling out ahead of earnings and are essentially holding shares at that key level.
Fellow S&P 500 component SolarEdge is another large-cap forming a cup-with-handle ahead of its upcoming earnings report. The company reports fourth-quarter results on February 13 after the market’s close.
Wall Street expects earnings of $1.55 a share on revenue of $875.38 million, which would increase over the year-earlier quarter. According to MarketBeat earnings data for SolarEdge, the company beat revenue views and missed earnings views in each of the past four quarters.
A look at the SolarEdge chart shows a cup-with-handle chart that’s been forming since late July, with a buy point above $341.66.
SolarEdge has been chopping along sideways for the past two years. The EIA report referred to supply-chain issues deterring installations in 2022, and SolarEdge has also alluded to supply-chain challenges.
At an investor conference in June 2022, CFO Ronen Faier said a shortage of semiconductors would hamper business expansion.
"I can say that we do see that things are relatively stable, which is not necessarily good," Faier said at the time. "It's limiting our growth in many senses."
Analysts already see SolarEdge’s picture turning around beginning in the fourth quarter, as it would mark a return to earnings growth after two-quarters of declining profitability.