Though solar energy stocks are lagging in 2024, the sector has bright days ahead. Analysts project that one in seven homeowners will have solar installed by 2030, especially if presidential administrations keep tax credit opportunities on the table moving forward. Already, solar capacity tripled over the past six years, and continued technological innovations combined with reduced costs will accelerate the trend across residential and commercial sectors.
However, it’s important to balance your solar energy stocks in 2024. Many investors use a shotgun approach, picking top names no matter their competitive position. This often leads to an over-concentration in residential solar stocks that directly compete with one another, creating a messy portfolio. Instead, try to diversify your holdings. These three stocks represent key sectors—residential, storage, and commercial—and create a well-balanced solar stock portfolio for 2024.
Sunrun (RUN)
Specializing in residential solar services, Sunrun (NASDAQ:RUN) provides everything from installation to unique financing and leasing options. Their strategy aims to broaden solar energy accessibility for homeowners, coupled with thorough service and maintenance. Sunrun distinguishes itself through its adaptable financing solutions, dedication to customer satisfaction and extensive after-sales support, positioning it at the forefront of the residential solar industry. Residential solar, for better or worse, is full of bad actors with questionable operating methods, which puts a stain on the overall sector—but Sunrun seeks to change that perception.
Sunrun is having a tough start to 2024 as shares trade nearly 25% below where it started. Still, the company’s 2023 stats were strong and that momentum could carry over into 2024. In the company’s most recent quarterly filing, it posted double the preceding period’s storage installation rate. Most compelling, though, is Sunrun’s securitization of systems, which lets traders invest in the company’s solar financing structure and offers quick cash infusion at a time when overall solar sales are slacking and higher capital costs put pressure on residential companies.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) tends to be one of the most popular solar stocks, with good reason. They’ve long established a unique position in the solar industry through their innovative microinverter technology, enhancing the efficiency and safety of solar installations. Their business model prioritizes ongoing innovation for residential and small-scale commercial solar sectors. Enphase’s strategy includes broadening its international reach, improving product offerings, and penetrating new markets. The company’s competitive edge stems from its advanced microinverter technology, significant global presence and solid brand reputation within the solar industry.
Like Sunrun, Enphase suffers from higher rates, putting pressure on capital costs and decreasing solar demand. That’s why the company is rapidly right-sizing itself through an aggressive restructuring campaign. Those initiatives will likely cause some continued short-term volatility but don’t detract from its spot as a top solar stock in 2024.
Stem (STEM)
Stem (NYSE:STEM) is unique in that the solar stock combines two hot sectors: renewable energy and artificial intelligence. This solar stock stands at the crossroads of AI and energy storage, dedicated to refining energy consumption for commercial and industrial clients.
Their premier software, Athena, leverages sophisticated analytics to automate energy-related decisions, yielding significant savings in both costs and energy. Stem’s approach involves broadening its influence via strategic alliances and venturing into new territories, seizing the increasing appetite for smart energy solutions. The cornerstone of the company’s competitive advantage is its distinctive AI-centric methodology, distinguishing it within the clean energy storage sector.
The company’s recent quarterly report points to imminent profitability, creating bullish tailwinds to propel the stock. Likewise, its enterprise-level emphasis helps shield it against ongoing struggles throughout residential solar markets. Furthermore, priced well below our other two solar stock picks for 2024, STEM is a perfect way to round out a well-developed solar stock portfolio.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.