Please ensure Javascript is enabled for purposes of website accessibility

Why Solar Stocks Kept Climbing Tuesday

By Rich Smith – Jul 15, 2020 at 8:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Downgrade or no downgrade, these solar stocks were stars today.

What happened

Investor enthusiasm for the merger between Sunrun (RUN -11.43%) and Vivint Solar (VSLR) continued unabated on Tuesday. In fact, it seems investors are so enthused that their enthusiasm may have overcome some rather negative news for one of these companies' solar power rivals, SunPower Corporation (SPWR -8.60%).

All three of these stocks ran up on Tuesday, with Vivint shares gaining 13.5%, Sunrun rising 12.3%, and SunPower gaining an even 10%.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

It's that last result that's most surprising. You see, just this morning, SunPower got itself downgraded by analysts at Spin-Off Research (SOR). According to SOR, SunPower stock that currently costs nearly $10 a share is actually worth only about $7. In the analysts' opinion, that makes SunPower stock a "sell," reports today. So ... why is SunPower rising?

SunPower manufactures solar panels, and also provides solar energy "services," including construction of everything from solar systems for installation on rooftops to the construction of entire solar energy plants. In this latter capacity, the company is therefore a sometime competitor to both Sunrun and Vivint, and a logical loser to a deal that combines two of its biggest foes into a market giant.

And yet, the mere fact of combining two competitors into one may result in lessened competition in this market, benefiting even smaller competitors like SunPower.

Now what

At the same time, SunPower is currently in the process of splitting itself into two companies: Maxeon, which will inherit the company's manufacturing operations, and SunPower, which will continue providing solar "services." Theoretically at least, such a split-up could make SunPower's (which is to say, Maxeon's) solar panels more attractive to companies that would no longer be competing with it after the spinoff.

Additionally, as my fellow Fool and solar specialist Travis Hoium suggested last week, it's possible that with the way things are evolving in the solar industry, even SunPower itself might not compete directly with a combined Sunrun-and-Vivint going forward, preferring to "assume the role of the service and technology partner for local and regional installers" instead.

In such a case, this merger might not be bad news for SunPower at all. In such a case ... all three stocks may actually deserve to have gone up today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SunPower Corporation Stock Quote
SunPower Corporation
$22.54 (-8.60%) $-2.12
Vivint Solar, Inc. Stock Quote
Vivint Solar, Inc.
Sunrun Inc. Stock Quote
Sunrun Inc.
$27.52 (-11.43%) $-3.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.