1 Solar Stock to Buy and Hold for the Next Decade

Solar stocks buy

Author: Tim Phillips

July 28, 2021

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In 2020, renewable energy stocks had a phenomenal run. One of the big reasons for this was the fact that investors, and companies alike, came to the realisation that clean energy was here to stay.

That has had profound consequences for many sectors and stocks that play into renewable energy. For example, electric vehicle (EV) maker Tesla Inc (NASDAQ: TSLA) saw its shares rise nearly nine-fold in 2020 alone.

In fact, in the US in 2020, according to the US Energy Information Administration (EIA), consumption of renewable energy expanded for the fifth consecutive year.

That was made more remarkable by the fact that it was the only source of energy consumption in the US that increased from 2019 to 2020 – both fossil fuel and nuclear consumption declined.

For long-term investors, that has all the hallmarks of a megatrend we can capitalise on given the world’s race to “carbon net zero”.

One of the biggest drivers of that growth in 2020 was solar power, which only made up 11% of total power generated from renewable energy last year, but grew by an impressive 22% from 2019.

The plummeting costs of solar generation mean it’s one of the fastest-growing sectors of the renewable energy industry. With that, here’s one solar stock investors can buy and hold for the next decade.

Delivering efficient solar

SolarEdge Technologies Inc (NASDAQ: SEDG) is an Israeli-headquartered solar energy firm that provides power optimisers, solar inverters and monitoring systems for photovoltaic (PV) solar panels.

Focusing on producing power optimisers and inverters, SolarEdge’s products allow for maximum electricity generation from every solar panel while converting this power into a wattage that can be utilised.

The company has a particularly large share of the residential solar installation market in the US, although this is starting to fall as competition heats up.

However, SolarEdge is expanding its market-leading position in residential solar, looking to move into the massive commercial solar market and battery storage.

Furthermore, since it has taken a leading position in producing these components for the domestic US market, it has already established itself within systems installed globally (see below).

SolarEdge Technologies global

Source: SolarEdge Technologies Q1 2021 earnings presentation

In 2019, SolarEdge ranked number one in terms of revenues for global PV inverter suppliers.

Looking to the future

While SolarEdge’s latest earnings saw revenue hit US$405.5 million, this was down 6% year-on-year but was up 13% on the fourth quarter of 2020.

Its GAAP gross margin was 34.5% which was an improvement over the 32.5% it had posted in the year-ago period.

SolarEdge is looking to move beyond just PV and focus more on the smart energy solutions market.

This provides ample opportunity for the firm to expand by providing innovative battery solutions and components for EVs.

SolarEdge has a track record of delivering returns to investors, with its shares up over 1,200% in the past five years.

For long-term investors who want exposure to the fast-growing solar energy market, SolarEdge is one name that can be at the top of your watchlist.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.