Solar stocks come under fire as supply chain bottlenecks hit renewable energy sector
choja | E + | Getty Images
Solar inventories fell on Tuesday, building on recent weakness, as companies warn of the impact of supply chain bottlenecks and parts shortages.
the Invesco Solar ETF, which tracks space, slipped 7%, taking its one-month drop to 15%.
SolarEdge was the biggest drag against the fund, falling 15%. The company declared profits after the bell Monday night. As the company’s results exceeded analysts’ expectations for revenue and earnings, SolarEdge warned of margin erosion in the future through higher shipping costs.
“Sea freight prices have risen by over 100% over the past few months and our pre-negotiated prices have gradually expired and exposed us to higher freight costs around the world,” said Zvi Lando, CEO of the company, when calling for results.
The company noted, however, that it has enough supply to meet demand in the second half of the year. This is in contrast to the competitor Enphase Energy, who said last week that his second quarter shipments would be limited by the global shortage of chips.
Semiconductors are key components for both battery storage and solar inverters. The shortage has also hit the auto industry, among others, with companies such as GM and Ford cutting production at several factories.
SolarEdge’s weakness spread to the rest of the industry on Tuesday, amid investor fears that companies might not be able to keep pace with record demand.
Sunnova reported higher than estimated profits on April 28, and the company also said it had stockpiled parts in anticipation of shortage fears. Still, stocks have fallen more than 20% over the past week.
SunPower and Sunrun are expected to release their results on Wednesday.
Still, some Wall Street analysts remain positive about the sector, noting that despite short-term headwinds, the long-term outlook remains strong.
“We are encouraged by demand trends and believe long-term investors should buy weakness in equities ahead of expected improvements in supply constraints in the coming quarters,” JPMorgan noted.
The group was also affected by the general liquidation of the market on Tuesday. The Nasdaq Composite was the loser among the major averages, falling more than 2.6% as investors pulled out of high growth areas of the market.
The Invesco Solar fund gained 233% in 2020, well outpacing the 16% gain of the S&P 500. For 2021, the fund is down 25% while the S&P 500 is up 10%.
– CNBC’s Michael Bloom contributed reporting.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews, and access to CNBC TV.
Register to start a free trial today