What happened 

Shares of solar stocks had a great month in August. According to data provided by S&P Global Market Intelligence, shares of Canadian Solar (NASDAQ:CSIQ) were up 46.7%, Sunrun (NASDAQ:RUN) was up 54.1%, First Solar (NASDAQ:FSLR) rose 28.6%, and SolarEdge Technologies (NASDAQ:SEDG) increased 26.3%. 

This was the case of the tide lifting all solar stocks, but there was some good reason for the move. Quarterly results were better than expected and solar companies may not have as bad a year as some had feared. 

Solar farm with mountains in the background.

Image source: Getty Images.

So what 

Canadian Solar is the biggest solar manufacturer on this list and is considered a bellwether for the industry. It reported a 31% sequential increase in module shipments to 2.9 gigawatts (GW), higher than guidance of 2.5 GW. Revenue was $696 million, gross margin 21.2%, and net income was $20.6 million, or $0.34 per share.

Sunrun gave investors a peek at the residential solar industry and, while it was weak as expected, demand did exist. Megawatts (MW) deployed were 78 MW and estimated net present value created was $34 million. On the downside, revenue fell 11% to $181.3 million and net loss rose from $1.3 million to $13.6 million.

First Solar reported sales of $642.4 million, up from $585 million because of project sales, and had net income of $36.9 million, or $0.35 per share. Management also reiterated module production of 5.9 GW for the year

SolarEdge's earnings weren't great, but were solid enough. Revenue was up 2% versus a year ago to $331.9 million and net income under generally accepted accounting principles (GAAP) was $36.7 million, up 11% from a year ago.

The theme here is that solar demand is strong globally, but the residential market is relatively weak, especially in the U.S. But that's driven by the pandemic and investors are betting that the U.S. market will recover quickly. 

Now what 

There are some market trading dynamics going on here with traders clearly bidding up solar energy stocks as a whole. But we're also seeing some strong performance by the industry during the global pandemic. Revenue hasn't cratered for most companies and that means they won't have to issue debt or shares to stay afloat over the next year. 

Long term, the industry's future is still bright because solar energy is now cost-competitive with fossil fuels in most of the world. That will drive demand and as new technologies like energy storage and hydrogen improve, the adoption rate of solar energy can grow without fears of oversaturating utilities at sunny times of the day. This is an industry with a great future, and last month the market was buying into that thesis. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.