Solar Concerns are ‘Near-Term Noise,’ Says Morgan Stanley Analyst

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In a note to investors, Morgan Stanley analyst Stephen Byrd said investor concerns surrounding solar trade restrictions are “near-term noise,” and the bottom line growth outlook is constructive.

Investors and analysts alike have become concerned that panel shipments will face documentation issues relating to the Uyghur Forced Labor Prevention Act (UFLPA). Earlier this week, a Roth Capital analyst said the restrictions “could be a major headwind near-term.”

However, Byrd disagrees, stating: “Based on our discussions, we would expect shipments to flow to the US. While there could be some short-term noise, we nonetheless see strong growth overall in 2023/24.”

As a result, Morgan Stanley reiterated an Overweight rating on solar stocks Sunrun Inc (NASDAQ:RUN) and The AES Corporation (NYSE:AES).

“Based on channel checks and industry expert discussions, we believe solar panels from Southeast Asia will continue to be shipped to the US, but there is some potential that a subset of panel shipments will face documentation issues relating to the Uyghur Forced Labor Prevention Act (UFLPA),” said Byrd. “That said, there are a number of supply options that can document no linkage to the Xinjiang Uyghur Autonomous Region, and we would expect any documentation issues to be resolved within a few months at most.”

“While there could be some near-term investor concerns around solar shipment risk under the UFLPA, overall we believe the OEMs can comply with UFLPA.”