2 Solar Stocks to Avoid in May

imageStock Markets20 minutes ago (May 07, 2021 03:30PM ET)

(C) Reuters. 2 Solar Stocks to Avoid in May

The market for solar energy is expected to grow significantly over the long term on increasing global governmental support and declining costs. However, the sector witnessed a sell-off recently due to expectations of rising interest rates, which is a big negative for solar companies. So, we think it is wise to avoid Enphase (ENPH) and First Solar (NASDAQ:FSLR) because they reported weak financials in the last quarter and are expected to experience a further decline.Because governments across the world have been taking steps to transition their countries to a renewable energy driven future, it’s no surprise that solar energy stocks have been at the forefront of the revolution given declining storage costs. However, the industry has been witnessing a sell-off lately as investors ponder whether the Federal Reserve will increase benchmark interest rates. Given solar projects’ large upfront costs, the industry is very dependent on debt financing. So, rising interest rates usually negatively affect solar companies. Furthermore, the solar industry is facing supply chain constraints and witnessing higher shipping costs.

Investors’ pessimism over the industry’s near-term prospects is evident in the Invesco Solar ETF’s (TAN) 16.6% loss over the past month compared to SPDR S&P 500 ETF Trust’s (SPY) 3.2% gains.

Amid this environment, we think it is wise to avoid solar stocks Enphase Energy, Inc. (NASDAQ:ENPH) and First Solar, Inc. (FSLR). These companies reported weak financials in their last quarterly releases and analysts expect their financials to weaken further.

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2 Solar Stocks to Avoid in May

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