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SolarCity Corp. (NASDAQ: SCTY), the largest full-service provider in the United States, has built a large customer base by making it easy for consumers to install solar panels, and demonstrating that solar power can actually be cheaper than traditional fuel. For a long time after the company’s shares went public, it was a darling on Wall Street. It was almost a year ago, Feb. 24, 2014, when shares of the stock peaked at $84.96, more than ten times their December 2012 IPO price of $8 a share.
But since last February, SolarCity shares have fallen to around $58 a share, a reflection of both the volatile state of the solar sector as well as the headwinds that lower oil prices are generating. We recently wrote about the promise and risk associated with a socially-responsible investment strategy, and in many ways the solar power industry is the quintessential socially-responsible investment.
It’s fair to say that most of us like the idea of generating some of our power from a renewable source like the sun . . . but most of us don’t have solar panels on our homes and offices. Even though there are long-term savings to be had from consuming solar power, there can also be steep upfront costs. Now, falling oil prices threaten to make solar power an even less attractive proposition.
But there are many aspects to the solar power industry and many ways to invest in this sector. Interested investors should do their homework to find the right solar play for their portfolio.
Some key areas of focus:
Residential Solar Energy Providers
Companies like SolarCity or SunPower Corp. (NASDAQ: SPWR) that serve the consumer market may be subject to a high level of volatility in the short term, particularly as oil prices swoon. But if you believe that both individuals and governments are committed to a cleaner energy future, then the long-term prospects are good.
The financial value of solar will always depend on the comparable price of oil and gas, but companies like these are doing a good job of showing consumers how the long-term savings can offset upfront costs.
Large-Scale Utility Solar Providers
First Solar Inc. (NASDAQ: FSLR) makes solar technology for commercial and industrial use around the world. This is a market that has the same basic drivers as the U.S. residential market, but it’s vastly larger and vastly more complicated. Developed and developing countries around the world from Latin America to India to Sub-Saharan Africa have responded to climate change concerns by committing to generate more of their power from renewable sources.
And right here in the U.S., Apple Inc. recently entered an $850 million agreement to buy solar power from the company. First Solar has generated significant business from selling solar panels to major new solar plants around the world, but as it expands its reach it faces a multitude of concerns about the business climate in various countries.
Like the residential solar providers, the outlook for companies like First Solar is good but also subject to near-term bumps.
Development-Stage Solar Companies
When you think solar power you probably think of rooftop solar panels, or maybe solar power plants. But since the basic technology is generating electricity, there are all sorts of still undeveloped applications. Ascent Solar Technologies Inc. (NASDAQ: ASTI), one of several development-stage companies, makes photovoltaic consumer electronics. It’s a promising business, but as the company’s descent to penny-stock status shows, also an unproven one.
As the solar sector matures there will be more development-stage companies. Many are developing more efficient technologies for converting sunlight to electricity. Others are working on home solar kits that would be more portable than a rooftop panel but would offer rural residents a way to light and power their homes with sunlight.
Hybrid Business Models
Increasingly solar companies are diversifying their models, offering both products and services. Canadian Solar Inc. (NASDAQ: CSIQ) develops solar technology for both the commercial and residential markets, as well as off-grid solar technologies. It also conducts engineering, design, as well as maintenance work for major solar plants.
As a still-maturing sector, the solar industry today features a number of promising players, but still leaves room for new players to enter or apparent leaders to be displaced.
Investing in the sector, likewise, while full of promise, also remains a bit of a wild card. Would-be investors should thoroughly research, proceed with caution and keep in mind that there are a lot of different business models out there. But solar in some form is here to stay.
Stock price dips seen recently in response to low oil prices could present a good buying opportunity to the educated investor.
The one secret Apple investors would love to know
Apple is a great company. Its products have revolutionized the way the world works and communicates. No small feat. Yet there’s one small secret that Apple hopes never becomes public. See, there’s actually another company behind all of Apple’s successes… and this company’s stock jumps five times higher than shares of Apple – every single time Apple launches a new product. If Apple investors new about this – there’d be a stampede for the door. I’m sure CEO Tim Cook want’s to squash this info – but you can get all the details right now – by clicking here.