12. RESPONSIBLE CONSUMPTION AND PRODUCTION

SunPower Stock Falls. Solar Is Up Against U.S. Policy and Slowing Housing Market. – Barron’s

Written by Amanda

A Wells Fargo analyst says a slowing housing market could crimp new solar sales.

Ben Stansall /AFP via Getty Images

SunPower slid on Wednesday after shares of the solar panel company were initiated at Underweight by a Wells Fargo analyst who cited unsupportive U.S. solar policies and a slowing housing market.

SunPower (ticker: SPWR) focuses primarily on building solar panels on residential homes. Michael Blum from Wells Fargo wrote in a research note that the slowing housing market was “likely to affect new solar sales.” He set a $17 price target on the stock.

Two closely watched gauges of new-home construction fell in May, according to government data. The seasonally adjusted annual rate of housing authorizations, or issuance of permits to build a home, decreased 7% month over month to about 1.7 million, while the rate of housing starts fell 14.4% to about 1.6 million.

“SunPower’s business is mostly direct sales, which we view as more sensitive to the economic environment given the large upfront cost of purchasing a solar rooftop system,” Blum said.

Shares of SunPower closed 10.8% lower on Wednesday to $15.14, while the S&P 500 fell nearly 0.1%.

On top of the slowing housing market, Blum wrote that he is “neutral to negative on solar in the near term given inflation, interest rate pressure, supply chain constraints, and government policy headwinds.”

Blum initiated coverage on two other solar stocks on Wednesday, including Sunnova Energy International at Equal Weight with a $22 price target, and SunRun at Equal Weight with a $27 price target. He also initiated coverage of power generation company Generac Holdings (GNRC) at Overweight with a price target of $285.

The White House announced earlier this month that President Joe Biden wouldn’t impose any new tariffs on solar imports for two years and authorized use of the Defense Production Act in an attempt to encourage U.S. production of solar panels. The decision came after the Commerce Department decided to investigate whether Chinese solar producers were illegally circumventing solar tariffs by routing operations through four countries, including Cambodia, Thailand, Vietnam, and Malaysia.

Blum wrote that U.S. policy “is not supportive of solar growth, in our view, with tariffs on Chinese solar panels, the Commerce Department’s investigation into possible circumvention of the tariffs (AD/ CDV), revisions to net metering, the possibility the solar ITC (investment tax credit) could not being extended, and a lack of clarity on whether clean energy incentives in a Build Back Better bill will pass.”

Blum isn’t the only one down on U.S. policy for solar.

In an interview with Bloomberg, First Solar (FSLR) Chief Executive Mark Widmar said that the White House moves don’t address underlying issues that give less expensive Asian panels an advantage over U.S. producers, and he instead is seeking tax breaks that will give First Solar economic incentives without raising prices for projects using imports. 

First Solar is still planning to build a manufacturing facility in either Europe or India, according to the Bloomberg report.

In an email statement to Barron’s, a First Solar spokesperson said the company previously stated that “we are evaluating the potential for future capacity expansion, but noted that we first required clarity on domestic solar policy to ensure that such expansion is well positioned. In the United States, which we have previously cited as a candidate for further expansion alongside India and Europe, there is uncertainty around the Solar Energy Manufacturing for America Act (SEMA) and the solar Investment Tax Credit (ITC), as well as the broader policy environment.

“Without these crucial supply- and demand-side policies to enable the growth of the U.S. solar industry, we do not have the confidence that continued investment in America is a top priority for us and our shareholders.”

Shares of First Solar (FSLR) closed down 1.3% on Wednesday. SunRun (RUN) dropped 6.3%, Sunnova Energy (NOVA) dipped 5.1% and Maxeon Solar Technologies (MAXN) was down 8.9%.

Despite the near-term headwinds Blum expects from the current state of the economy, he is positive on the long-term outlook for residential power “given a number of macro trends which should provide a tailwind to growth.”

“Our utility team believes utility rates will increase going forward due to a combination of higher natural gas prices, higher interest rates, and increased investment to fortify the grid, making solar more attractive for homeowners,” Blum said.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Source: barrons.com

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Amanda

Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai