What happened
Shares of solar energy stocks jumped higher across the board today on some fairly bullish earnings news from the industry. It hasn't hurt that interest rates are also falling around the world, which tends to make solar energy projects more economically attractive to developers.
SolarEdge Technologies (SEDG -2.16%) was one of the leaders today, rising as much as 14%. JinkoSolar (JKS -0.34%) was up 11.1%, and Daqo New Energy (DQ -0.80%) jumped as much as 11.8%. The stocks were up 10.8%, 9.8%, and 9.5%, respectively, at 1:45 p.m. EDT.
Image source: Getty Images.
So what
It actually wasn't any of these companies that moved the solar market today, but rather Enphase Energy (ENPH 0.62%) reporting its third-quarter 2021 results. The company said that revenue nearly doubled to $351.5 million and net income for the quarter was $21.8 million, or $0.15 per share.
Enphase's management also said it installed 65 MW of energy storage systems with 90 MW to 100 MW expected for the fourth quarter of 2021.
The first thing to take away from the results is that solar demand was strong, at least in the residential market. That should bode well for SolarEdge, provided the company isn't losing market share to Enphase's microinverters. Energy storage is another growth area for solar energy that SolarEdge is trying to compete in, so growth from Enphase could translate to SolarEdge as well.
JinkoSolar and Daqo New Energy are solar panel and polysilicon providers, so they're upstream in the market from companies like Enphase. But they should see a similar demand profile, so high demand for one solar company will likely bode well for others. That's why these stocks are up today.
Now what
There's a long way to go in earnings season, but right now it seems like demand is strong for solar products. Enphase should be a bellwether in the residential market and if demand for both microinverters and energy storage are strong, that should translate to growth for a lot of companies serving the industry.
We also didn't get an indication that supply was too constrained or margins were heavily impacted by higher costs. Management said that non-GAAP gross margin (which pulls out a tariff benefit in 2020) was 40.8%, down just slightly from 41% a year ago. We don't know if a strong margin profile will continue for solar panel manufacturers or installers, but this is a small, positive sign.
I would wait for more earnings reports to come out before changing my investment thesis on any solar companies. But early indications are that demand is strong, and that's good news for solar stocks so far this earnings season.
