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Sunrun, Sunnova, and First Solar Are Now Buys. This Analyst Is Positive on Clean Energy. -- Barrons.com

Barron's · 01/06/2023 09:23
By Angela Palumbo

Sunrun, Sunnova Energy and First Solar traded higher Friday after an analyst at Wells Fargo upgraded shares of the solar stocks saying he was confident in the future of clean energy.

Wells Fargo analyst Michael Blum upgraded Sunrun (ticker: RUN), Sunnova Energy (NOVA) and First Solar (FSLR) to Overweight from Equal Weight, highlighting the passage of the Inflation Reduction Act and strong demand in Europe as reasons for his now bullish view on the clean energy sector this year.

"While continued (Federal Reserve) tightening in early 2023 will likely act as a near-term headwind, the fundamental and regulatory backdrop is much improved in 2023 and beyond," Blum wrote in a research note.

The Inflation Reduction Act was passed in August 2022 and includes a range of tax credits and rebates with the intention of encouraging people to buy and use clean energy. Since the passing of this legislation, analysts across the board have turned optimistic on solar stocks, see these incentives boosting sales for clean energy companies.

"The passage of IRA should drive accelerated adoption of solar and hydrogen in the U.S. for the next decade," Blum said.

Blum added that the energy crisis in Europe should continue or even intensify over the next year, which could lead to strong solar demand there.

There are risks to solar companies in the coming months. Central bank interest rate hikes could put pressure on growth stocks such as clean energy, Blum said. However, if interest rates are raised too aggressively and lead to a recession, that might actually turn out to be a positive for the solar sector.

"A recession could potentially be a tailwind (counter intuitively) for residential solar as customers are likely to prioritize their energy bills in a recession especially in the context of rising utility bills," Blum said.

Shares of Sunrun, Sunnova and First Solar climbed 4.8%, 5.2% and 3.1%, respectively, in premarket trading Friday.

Write to Angela Palumbo at angela.palumbo@dowjones.com

(END) Dow Jones Newswires

January 06, 2023 09:23 ET (14:23 GMT)

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