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Wells Fargo sees solar rebounding in 2024, prefers residential to utility-scale stocks

Published 01/08/2024, 01:59 PM
Updated 01/08/2024, 02:02 PM
© Reuters.  Wells Fargo sees solar rebounding in 2024, prefers residential to utility-scale stocks
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Wells Fargo analysts adjusted the firm's ratings for clean energy stocks in their note covering the sector in 2024. The analysts upgraded shares of Enphase Energy (NASDAQ:ENPH) and Nextracker (NXT) to Overweight, and downgraded Array Technologies Inc. (ARRY) and First Solar (NASDAQ:FSLR) to Equal Weight, with SunPower (NASDAQ:SPWR) cut to Underweight.

The price target changes were as follows:

  • The ENPH price target was raised to $141 from $98
  • The ARRY price target was cut to $19 from $22,
  • The NXT price target was lifted to $57 from $45,
  • The FSLR price target was cut to $187 from $215
  • The SPWR price target was cut to $4 from $6

The bank expects solar to rebound in 2024, driven by Fed easing, higher battery attach rates, clarity on the Inflation Reduction Act, and steady utility-scale demand growth.

The analysts said the firm prefers residential to utility-scale solar stocks, given greater rate sensitivity.

"We expect residential solar to outperform utility-scale solar in 2024 given resi-solar's relative sensitivity to interest rate movements," explained the analysts. "We also expect resi solar to see a greater rate of change for growth given higher attach rates. In addition, key solar states (e.g. CA) are seeing sizable increases to utility rates this year, which should further support resi-solar economics in a falling rate environment."

ENPH was raised due to "an expected rebound in US resi solar," while NXT was lifted to reflect market share gains and backlog.

FSLR was downgraded due to its strong 2023 performance, the relatively defensive nature of cash flows, and the long-term potential ASP headwinds, while ARRY was cut on near-term market share losses, and SPWR was lowered to reflect liquidity-related headwinds.

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