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In a note to clients Friday, Daiwa Capital Markets analysts told investors in a note that the firm has initiated coverage with an Outperform rating on Enphase Energy (NASDAQ:ENPH) and First Solar (NASDAQ:FSLR) with a $335 and $175 price target, respectively, and a Neutral rating on SolarEdge Technologies (NASDAQ:SEDG) (SEDG) with a $325 price target.
They explained the firm sees investment opportunities in the renewable energy technology sector, which is experiencing “secular growth beyond the current economic cycle and dour conditions.” In addition, they argue that unique macro catalysts should boost company growth, expansion, and upside.
“Solar is key in reaching emission and carbon-free targets set by many worldwide governments. Solar installations have increased,” wrote analysts. “But you do not need to be an ESG believer or environmentalist to believe in solar. The economics of solar as an energy source has become quite compelling.”
Daiwa prefers companies with existing domestic manufacturing as the most immediate beneficiaries, while they believe demand should also accelerate, “likely even further when domestic manufacturing is more established, which should lower prices further and make renewables economics more compelling.”
“We also like those with a tech differentiator and can deliver GM expansion, which fits both ENPH and FSLR. While SEDG also benefits from the secular growth, we think SEDG will be more challenged in expanding GMs and continue to lose market share in the U.S. market,” the analysts concluded.
