Why This Analyst Raised Solar Stock Price Targets After Georgia Senate Runoff

The Invesco Solar ETF TAN jumped Wednesday following what appears to be a likely Democratic sweep of Georgia's Senate seats. One Wall Street analyst took the opportunity to raise price targets for red-hot solar stocks.

The Solar Analyst: BofA Securities analyst Julien Dumoulin-Smith raised price targets for the following three stocks Wednesday:

• Sunnova Energy International Inc. NOVA, reiterated Buy rating, price target raised from $46 to $52.
• Sunrun Inc. RUN, reiterated Buy rating, price target raised from $79 to $94.50.
• SunPower Corporation SPWR, Underperform rating, price target raised from $10 to $12.
• Related Link: How To Invest In The Clean Energy 'Triple Crown' In 2021

The Solar Thesis: The new targets reflect the latest two-year extension of the solar investment tax credit included in the recent stimulus package, Dumoulin-Smith said in a note.

BofA is anticipating a further three-year extension of the credit sometime during President Joe Biden’s first term, the analyst said. 

While the tax credit extensions are bullish for the entire solar space, he said the impact will be largest for the residential solar subsector due to its direct exposure to ITCs.

Bank of America is projecting that long-term volume growth in the residential solar market will likely trend on the lower end of the historical 15% to 20% growth range through the end of the projected ITC extension period, Dumoulin-Smith said. 

“Beyond the residential solar subsector, we see clear positive read-throughs for other solar equipment peers, as well as downstream developers.”  

BofA’s price target hikes come just a day after Goldman Sachs downgraded First Solar, Inc. FSLR from Buy to Sell and cut its price target from $101 to $81 on concerns that margins and earnings per share will peak by mid-2021.

BofA maintaied  a Neutral rating and $94 price target for First Solar.

Benzinga’s Take: It would be difficult to argue that a Democratic election sweep in Washington is anything but good news for solar market fundamentals. The path to investor upside from here will depend on just how much optimism is already baked into solar stocks, with the TAN ETF now up 340% in the past three years.