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Why Solar Power Stocks Are Crashing Thursday

By Rich Smith – Updated Sep 3, 2020 at 3:05PM

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Solar was hot. Suddenly it's not?

What happened

The Nasdaq is selling off -- hard -- today, with the tech-heavy index down about 3.9% at around 11:45 a.m. EDT. Solar stocks are not immune to the carnage, and in particular, we're seeing shares of soon-to-merge Vivint Solar (VSLR) and Sunrun (RUN -6.25%) down 9.1% and 9%, respectively.

Elsewhere in the solar sector, Enphase Energy (ENPH -0.89%) and SolarEdge Technologies (SEDG -4.83%), both manufacturers of solar inverter gear that convert direct-current sunlight into alternating-current electricity usable by our appliances and devices, are down 11.1% and 8.8%, respectively.

Why?

Big red arrow over a stock chart

Image source: Getty Images.

So what

I don't mean to be glib, but there may not be a specific reason why solar stocks are down today -- other than the fact that they've already gone up so very much, and investors may be getting afraid of the heights. Over the past 52 weeks, shares of Enphase stock have more than tripled in price, and SolarEdge stock has done almost as well. And Vivint and Sunrun?

Each of those seemed headed for a clean 52-week quadrupling before today's sell-off.

Now what

The plain truth of the matter is that there appears to be no particularly bad news on the wires to explain why any of these specific stocks should be going down today. Of analyst downgrades or price target cuts, there's been not a peep. No earnings warnings or otherwise negative press releases, either.

Why, up until last week at least, even oil prices appeared to be stabilizing in the low- to mid-40s, a fact that would tend to argue in support of buying alternative energy stocks (which profit from being alternatives to more expensive oil).

That being said, the ugly side to any price rally of the magnitude we've seen this year is that it tends to leave stocks trading at rich valuations -- 60 times trailing earnings for Enphase, 66 for SolarEdge, 366 for Sunrun, for example -- that may not be supportable in the event investors get nervous and become even modestly less irrationally exuberant.

My guess: That's what's happening right now, and it's why solar stocks are selling off... along with everything else overpriced and techy today.

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

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Stocks Mentioned

Enphase Energy, Inc. Stock Quote
Enphase Energy, Inc.
ENPH
$255.15 (-0.89%) $-2.30
Vivint Solar Stock Quote
Vivint Solar
VSLR
Sunrun Stock Quote
Sunrun
RUN
$25.51 (-6.25%) $-1.70
SolarEdge Technologies, Inc. Stock Quote
SolarEdge Technologies, Inc.
SEDG
$209.62 (-4.83%) $-10.65

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

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