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Should You Buy Solar ETF Post Q1 Earnings?

The solar industry has been under pressure recently due to the supply crunch in global chips. A global shortage of semiconductors to auto and electronics makers is now hitting the solar stocks, sparking concerns over the companies’ ability to meet the record demand.


As a result, the pure-play Invesco Solar ETF TAN has plunged about 15% in a month. The beaten down prices might be a solid entry point for investors looking for bargain picks (read: Solar ETFs Crash: What Lies Ahead for the Clean Energy Space?).


This is because Biden’s push for clean energy and infrastructure plans will continue to fuel growth in the space. The President plans to pump $2 trillion into green energy over four years to build solar panels, charging stations and more, and aims for net-zero emissions by 2050. Additionally, the recent two-year extension of the investment tax credit will drive greater solar adoption through 2025.


Further, the industry fundamentals have been robust for the solar energy. This is primarily thanks to declining solar panel prices that will continue to attract new buyers, who want to save on the otherwise uncertain energy costs. Rising demand for a broad range of solar products such as solar-powered generators, portable smartphone chargers, outdoor motion sensor lights, backpacks, and cookers also bodes well for the industry.


Other than this, a slew of better-than-expected earnings has added to the industry’s strength.


TAN in Focus

This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 56 stocks in the basket. It is moderately concentrated on components with each making up for not more than 9.3% of the assets. American firms dominate with 44.5% of the fund’s portfolio, followed by China (20.9%) and Spain (6.9%). The product has amassed $2.9 billion in its asset base and trades in a solid volume of around 2.1 million shares a day. It charges investors 69 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: ETF Areas That Investors Can Consider for May).


We have highlighted earnings of some stocks that are among the top 10 holdings in TAN. Let’s take a look into the individual quarterly reports:


Solar Earnings in Focus

First Solar FSLR reported better-than-expected earnings. Earnings per share of $1.96 beat the Zacks Consensus Estimate by 96 cents and improved 130.6% from the year-ago earnings. Revenues climbed 51% year over year to $803.4 million and edged past the estimate of $695 million. The stock occupies the fourth position with 6.4% of assets.


Enphase Energy ENPH reported adjusted earnings of 56 cents per share, which surpassed the Zacks Consensus Estimate of 41 cents but increased 47.4% from the year-ago earnings of 38 cents. Revenues soared 105.2% year over year to $301.8 million but edged past the consensus mark of $293 million. The company takes the top spot, accounting for a 9.3% share in the fund’s basket.


SolarEdge Technologies SEDG reported mixed results. It posted earnings of 98 cents per share, missing the Zacks Consensus Estimate by 9 cents and improving 3% from the year-ago earnings. Revenues shed 6% year over year to $405.5 million and came well ahead of the consensus mark of $96 million. SolarEdge takes the second spot with 9% allocation (see: all the Alternative Energy ETFs).


Sunrun Inc. RUN posted a loss of 11 cents per share, wider than the Zacks Consensus Estimate of loss of 3 cents. The company had incurred a loss of 23 cents per share a year ago. Revenues came in at $334.8 million, up 59% from the year-ago quarter and above the Zacks Consensus Estimate of $313 million. The stock occupies the third position with a 6.6% share in TAN.


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