Potential Upside for Residential Solar Stocks as Interest in Home Solar Systems Remains Strong
According to JPMorgan, there is potential for better-than-expected uptake in residential solar energy, which could bode well for certain stocks in the sector. A recent survey conducted by the firm reveals "robust" interest in residential solar, leading to a positive long-term outlook for the industry. Despite the struggles faced by the market, with the Invesco Solar ETF (TAN) down over 24% this year, JPMorgan believes that homeowner interest in adding residential solar systems is stronger than current investor sentiment suggests. Analyst Mark Strouse recommends long-term investment in high-quality residential solar stocks as the market gains favor over time.
Positive Homeowner Interest and Market Potential
The survey results indicate that around three out of every five homeowners surveyed expressed interest in residential solar, a figure that Strouse describes as positive considering the relatively low current market penetration. However, homeowners remain cautious about upfront costs, with a majority unwilling to pay more than $5,000. Despite this, falling prices and stabilizing financing costs could lead to installations surpassing base forecasts.
Challenges and Opportunities for Residential Installers
While homeowners show interest in solar, the survey suggests that their decision to install solar may not be immediate. Strouse highlights the need for more homeowner education on costs and the solar market, which can benefit larger residential installers like Sunrun, Sunnova, and SunPower. Additionally, over half of the respondents across income brackets reported needing at least 15% savings to be interested in installation.
Utility-Scale Solar and Favorable Recommendations
Strouse still favors utility-scale solar and recommends Array Technologies, Shoals Technologies, and Nextracker for the second half of this year. Notably, Array Technologies has outperformed the broader industry downturn, with a gain of over 27% this year.
In conclusion, JPMorgan's survey indicates strong interest among homeowners for residential solar systems, presenting potential upside for stocks in the sector. While upfront costs remain a concern, falling prices and increased homeowner education can drive installations beyond base forecasts. This positive sentiment, coupled with the continued favor for utility-scale solar, offers opportunities for investors and larger residential installers alike.
Conclusion: Implications for New Businesses in the Solar Sector
The findings of JPMorgan's survey and the subsequent analysis by Mark Strouse offer valuable insights for new businesses in the solar sector.
Understanding Market Sentiment and Potential
The robust interest in residential solar among homeowners, despite the current market struggles, underscores the potential for better-than-expected uptake. This suggests that new businesses in the sector could find a receptive market, provided they can address concerns about upfront costs and offer competitive pricing.
Importance of Customer Education
The survey's findings also highlight the importance of customer education. Homeowners' hesitation to make immediate decisions about solar installation suggests a need for more information about costs and the solar market. New businesses can leverage this opportunity to provide comprehensive education and guidance, potentially accelerating decision-making and boosting installations.
Opportunities in Utility-Scale Solar
Strouse's favor for utility-scale solar and his recommendations for the second half of the year indicate potential opportunities in this space. New businesses could consider exploring utility-scale solar projects, which could offer a hedge against the volatility of the residential solar market.
In conclusion, while the solar sector presents challenges, the strong homeowner interest and potential for market growth offer significant opportunities. By understanding market sentiment, focusing on customer education, and exploring utility-scale solar, new businesses can navigate these challenges and position themselves for success.