The growing demand for solar power units and the passage of the Build Back Better Bill in the House of Representatives last month has raised investor optimism in the solar industry. However, Senator Joe Manchin’s current opposition to the climate change bill will likely stop the bill’s passage in the 50-50 Senate. As a result, it is wise to avoid fundamentally weak and overvalued solar stocks Enphase Energy (NASDAQ:ENPH), SolarEdge (SEDG), First Solar (NASDAQ:FSLR), and Sunrun (NASDAQ:RUN) for now. The $1.75 trillion Build Back Better Bill was passed in the House of Representatives in November, which includes significant funding and tax credits for the renewable energy and electric vehicle industries. This, combined with the growing demand for residential and industrial solar power units, has raised investor optimism in the solar industry and incentivized companies to develop efficient product portfolios. The global solar energy market is expected to grow at a 20% CAGR to reach $200 billion by 2026.
However, Senator Joe Manchin III has recently shown his opposition to the social spending and climate change bill (designed to eliminate coal and natural gas), sharing concerns over certain provisions of the massive tax and spending bill and how it may exacerbate soaring inflation in the country. Manchin’s vote is crucial in passing the climate change bill in the 50-50 Senate. Besides, the ongoing supply chain constraints and rising prices are expected to act as major headwinds for solar companies.
Given this backdrop, fundamentally weak solar stocks Enphase Energy, Inc. (ENPH), SolarEdge Technologies, Inc. (NASDAQ:SEDG), First Solar, Inc. (FSLR), and Sunrun Inc . (RUN) are best avoided now.