Goldman Sachs Expects Solar Stocks To Continue Shining: Here Are The Biggest Beneficiaries Of The Inflation Reduction Act

Zinger Key Points
  • Goldman Sachs analysts upgrade First Solar and Maxeon, but downgrade Shoals and Canadian Solar on Thursday.
  • "Simply put, we see stocks with U.S. leverage and/or U.S.-based manufacturing as fundamentally best positioned," said Goldman Sachs.
Goldman Sachs Expects Solar Stocks To Continue Shining: Here Are The Biggest Beneficiaries Of The Inflation Reduction Act

Solar stocks traded significantly higher over the past month following the passage of the Inflation Reduction Act, which included several investments in clean energy.

Investors may be wondering what they should do with solar names following these steep gains. Goldman Sachs tackled that question Thursday in a note to clients.

What To Know: The Inflation Reduction Act has been a major catalyst for solar stocks, as it's expected to increase demand for several clean energy sources. Goldman Sachs believed the major upside drivers of the new policy include greater medium-to-longer term demand growth owing to the extension of tax credits and higher returns stemming from manufacturing incentives. 

"Simply put, we see stocks with US leverage and/or US-based manufacturing as fundamentally best positioned ... with ~40% return potential still remaining across our Buy rated ideas," the firm wrote in a note to clients.

Of all the solar stocks Goldman Sachs had a Buy rating on, Sunrun Inc RUN and Array Technologies Inc ARRY offered the most upside from current levels, according to Goldman analysts.

Additionally, Goldman Sachs expected Array and First Solar Inc FSLR to benefit the most from solar manufacturing production credits for panels, inverters, batteries and trackers.

Rating Changes: First Solar is the clearest beneficiary of manufacturing credits with the company being able to claim credits for cell and module manufacturing. As a result, the firm upgraded First Solar from Sell to Buy on Thursday morning and raised the price target from $60 to $172.

Goldman also saw solar cell and panel credits benefitting Maxeon Solar Technologies Ltd MAXN assuming the company is able to establish 3 gigawatts of additional capacity in the U.S. in 2025.

Goldman Sachs also upgraded Maxeon from Sell to Buy on Thursday and raised the price target from $9 to $27.

See Also: Benzinga's Top Ratings Upgrades, Downgrades For September 8, 2022

Goldman Sachs downgraded a couple of solar stocks on Thursday as well, citing downside risk to estimates and relatively less leverage to the upside benefits of the Inflation Reduction Act.

Goldman analysts downgraded Shoals Technologies Group Inc SHLS from Buy to Sell and lowered the price target from $23 to $21. The firm also downgraded Canadian Solar Inc CSIQ from Neutral to Sell and lowered the price target from $43 to $38.

Photo: Bruno from Pixabay.

Posted In: energyGoldman SachsInflation Reduction Actsolar energyAnalyst ColorUpgradesDowngradesPrice TargetSmall CapAnalyst Ratings