Investing in Solar Energy Stocks

The solar energy industry builds and installs devices to capture energy from the sun and convert it into electric power. Companies in the industry are working to transition the global economy from fossil fuels such as oil and natural gas to renewable energy sources. It will take trillions of dollars and many years to complete the transition, making the solar energy industry a compelling opportunity for long-term investors.

The sector encompasses a wide variety of companies with the following functions:

Best solar stocks to invest in 2024

Solar energy represents an enormous market opportunity. To decarbonize the economy, the U.S. needs to invest an estimated $1.2 trillion in solar energy developments alone through 2050. Meanwhile, the global investment opportunity for solar is even larger.

Many companies focus on solar energy and should benefit from the sector's growth. However, not all have strategies designed to enhance value for their shareholders. Three solar energy stocks that stand out as the most worthy of investors' consideration are:

1. First Solar

• (FSLR 5.87%)
• Manufactures thin-film solar panels.

Brookfield Renewable

• (BEP 4.28%) and (BEPC 3.54%)
• Operates solar energy generating facilities, wind farms, and hydroelectric power plants. It also has investments in several sustainable solutions, including solar panel manufacturing.

Enphase Energy

• (ENPH 6.5%)
• Manufactures microinverters for solar panels.

Here's why these solar stocks shine brightly in this rapidly expanding industry.

First Solar

1. First Solar

First Solar is a global leader in developing solar energy solutions. It develops, manufactures, and sells advanced solar modules.

One thing that sets First Solar apart from other solar panel makers is its focus on manufacturing a proprietary, advanced thin-film module. In less-than-ideal conditions, such as low light and hot weather, its panels perform better than competing silicon modules. They're also larger in size, which helps reduce the cost per watt. Those factors make them ideal for utility-scale solar energy projects.

First Solar also distinguishes itself from its peers in the solar sector by having one of the strongest balance sheets. It routinely has more cash than debt (it expects to end 2024 with a net cash balance between $600 million and $900 million), giving it the financial flexibility to continue executing its strategy of developing and building thin-film solar modules for utility-scale customers, including expanding its manufacturing capacity. First Solar is in an excellent position to thrive as the solar industry continues expanding.

First Solar also has a lot of growth lined up. In mid-2024, the company had 75.9 gigawatts (GW) of total bookings in its backlogs, which extend out through 2030. Meanwhile, it had another 80.6 GW of booking opportunities in its pipeline. It's investing heavily in expanding its solar panel manufacturing capacity to capitalize on the sector's growth. The investments should enable First Solar to expand its revenue and earnings at rapid rates in the coming years.

Brookfield Renewable

2. Brookfield Renewable

Brookfield Renewable is a renewable energy yieldco -- a subsidiary created to hold particular assets -- that was created by leading alternative asset manager Brookfield Asset Management (BAM 3.77%). The energy company generates renewable energy that it sells under long-term power purchase agreements. Brookfield's business model provides it with steady cash flow to pay an attractive dividend yield (more than 5% in mid-2024), hence the yieldco designation.

Brookfield Renewable has a diversified renewable energy portfolio. It's a global leader in hydroelectric power plants. It complements those facilities with rapidly expanding onshore and offshore wind energy, utility-scale and distributed generation (e.g., rooftop) solar, and energy storage platforms. The company also has a growing sustainable solutions business, which includes carbon capture and storage, biofuel production, nuclear services, and solar panel manufacturing.

The clean energy company believes solar could make up the majority of its production capacity within the next decade -- not because it doesn't see a bright future for wind or hydro, but because it sees greater opportunity in solar. Declining costs are making solar development projects increasingly lucrative.

Brookfield has made several acquisitions in recent years to increase its solar energy development capabilities. In 2024, it agreed to buy a majority stake in Neoen. The leading European renewable energy developer had 8 GW of wind, solar, and storage assets in operation or under construction. It had another 20 GW of projects in its advanced-stage development pipeline.

Brookfield's solar-powered development pipeline has it on track to expand its funds from operations (FFO) per share at a 3% to 5% annual rate through 2028. On top of that, it sees other organic growth drivers and acquisitions pushing its FFO growth rate above 10% annually. That should support the company's plan to increase its high-yielding dividend by 5% to 9%. Its dividend growth makes it one of the top renewable energy dividend stocks. Meanwhile, its overall combination of growth and income should enable Brookfield Renewable to generate attractive total returns in the coming years.

Enphase Energy

3. Enphase Energy

Enphase Energy (ENPH 6.5%) is a pioneer in the solar industry. The company launched its revolutionary microinverter technology in 2006. It helps convert the direct current (DC) produced from sunlight into alternating current (AC) used in homes and businesses. The company has since expanded its capabilities to provide battery storage and EV chargers.

As of mid-2024, Enphase has shipped 76.3 million microinverters. It has also supplied more than 4.3 million systems to over 150 countries and shipped 1.4 GWh of energy storage systems.

That's only the beginning. The company's innovation has opened up new market opportunities. Enphase estimates that its serviceable addressable market will reach $25.4 billion by 2025. That's a massive market for a company that only did $303.5 million in revenue in the second quarter of 2024.

Related investing topics

Future of solar energy

Solar energy's future has never looked brighter

Solar energy was already on track for significant growth before the election of President Joe Biden. However, with his pledge to put the U.S. on a path to an emissions-free future, his administration could supercharge the sector's expansion. He has set a bold goal for the U.S. to generate 100% carbon-free electricity by 2035. Biden is also proposing extending tax credits and making direct investments to accelerate the shift to clean energy. Congress has already passed two bills during his administration that could help encourage the development of renewable energy in the country.

As a result, the solar industry could grow even faster in the coming years than current projections suggest. This potential growth is another reason why investors should consider investing in solar energy stocks. First Solar, Brookfield Renewable, and Enphase Energy stand out as among the best options, thanks to their strong financial profiles and visible growth outlooks.

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