Solar stocks hammered as sector expected to lose out in Trump administration - MarketWatch

Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Solar stocks have been crushed over the past year as an oversupplied industry has put downward pressure on solar prices and investors demanding higher returns have brought the value of solar assets down.

What shouldn't be overlooked, however, is that solar energy still has enormous potential for investors. FSLR , SunPower Corporation NASDAQ: SPWR , and 8point3 Energy Partners LP NASDAQ: CAFD are three companies that will benefit when the market turns around.

In an industry where financials can fluctuate, balance sheets matter a lot. And no solar company has a better balance sheet than First Solar, Inc.

The company has long maintained a high level of cash and very little debt, allowing flexibility when the market goes through turmoil. FSLR Total Long Term Debt Quarterly data by YCharts. First Solar's big improvement over the past three years has been a jump in its solar panel efficiency. The company has long been a low cost manufacturer, but it was behind even commodity solar panels in efficiency. That's no longer the case, with average conversion efficiency at The utility scale solar business that First Solar serves will see weak results over the next 18 months because of a drop in demand in the U.

But the company's balance sheet will be able to live through the turmoil and come out on the other side as a profitable company with a differentiated product. Solar manufacturer SunPower is in a slightly different market. It produces a high efficiency panel that puts it in a position to do well in the residential and commercial markets.

These markets are constrained by space and put more value on efficiency. About half of the company's panels are currently going into residential and commercial sales, which are gaining momentum. The Equinox residential solar system has sold better than anticipated, and Equinox sales for commercial building have begun to ramp up as well. And management is upgrading a MW facility from lower efficiency E-Series panels to X-Series, which are the highest efficiency on the market today.

3 Top Solar Stocks to Buy Now -- The Motley Fool

In the utility scale business, SunPower has introduced its third generation Oasis platform, which uses drones to design sites, is more flexible on land usage, and even allows for farming or grazing on a site.

Like First Solar, the power plant business will likely be slow in because of those same subsidy changes facing First Solar, but SunPower is already signing power purchase agreements for projects that will begin production in For a more stable company, investors should look at 8point3 Energy Partners, a yieldco created by First Solar and SunPower to own and operate solar power plants.

The yieldco pays cash upfront for solar projects, then collects cash from utilities and other customers over the duration of a contract, which is usually more than 20 years. This creates consistent cash flows that are paid to investors in the form of a dividend.

What's attractive right now is the 6.

Top 3 Solar Stocks for | Investopedia

And we know that power plants already on the balance sheet will be producing cash to pay that dividend for decades to come. And it doesn't come with the same risk level as solar manufacturers either.

Travis Hoium owns shares of 8point3 Energy Partners, First Solar, and SunPower. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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