Interest rate jitters and fresh investor lawsuits hurt solar energy stocks again this week. S&P Global Market Intelligence reported that SunPower (NASDAQ: SPWR) down 13.2% this week, Sunrun (NASDAQ: RUN) fell 25.4%, and Sunnova Energy (NYSE: NOVA) fell 19.1% at its worst point. These stocks fell 6.6%, 21.3%, and 16.4% this week.
Interest rates hurt solar equities. The hike in interest rates affected solar energy companies hardest this week. The 1-year U.S. Treasury bond rate rose from 4.23% to 4.31% last month. Investors believed the Federal Reserve will keep its benchmark federal funds rate higher longer than expected due to February's higher inflation reading.
Most investors expected numerous Federal Reserve rate cuts in 2024, but inflation continues over the central bank's objective, delaying any reduction. February's CPI grew 3.2% year-over-year.
Solar industries depend on interest rates because projects are financed over decades. The projects' long-term cash flows have a lower current value when their funding interest rates are greater. Sunnova and Sunrun are particularly affected because they finance all their solar systems. SunPower sells cash, loans, and leases, but leases are in demand.
Under fire: Sunnova's business Sunnova may be sued after a Congressional investigation uncovered "troubling sales practices." Lawsuits are common, and the solar business has historically struggled with pressure marketing to clients who may not grasp the long-term commitment that solar power systems require. Sunnova's open-ended stock sale campaign might finance installations but dilute owners.
Solar energy firms face many questions. Investors dislike ambiguity, and solar firms provide a lot. Their products' demand, interest rates, and long-term solar-energy storage mix remain unknown.
So it makes logical that solar energy stocks fell this week. If SunPower, Sunrun, and Sunnova can overcome their short-term liquidity issues, their shares may be attractive to long-term investors. Solar subsidies are increasing, energy storage is cheaper and will generate money, and costs are predicted to drop in 2024.
Solar enterprises will benefit when power rates climb due to rising demand. Investors worry about the non-straight journey from here to there.
According to their fourth-quarter earnings results and conference calls, solar businesses expect demand to rise in the second half of 2024 due to contracts they're signing. California generates most of the industry's U.S. revenue, but demand is taking time to transition to the 2023 Net Energy Metering 3.0 legislation. I think equities can rise, but this may not be the bottom.
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