What happened
Solar energy stocks had a great start to the week and continue to show incredible strength in the market over the last few months. There are tailwinds from higher oil and gas prices, potential subsidies from the government, and even earnings.
Shares of Enphase Energy (ENPH -5.56%) jumped 27% in the first four days of the week on a very strong earnings report. That helped push all solar stocks higher, especially in the residential energy sector.
Sunnova Energy International (NOVA 0.26%) was one of the stocks that were pulled higher, climbing 14.3% in the first four days of the week. And Enphase competitor SolarEdge Technologies (SEDG 1.92%) was up 15.9%.
Image source: Getty Images.
So what
The biggest news of the week is Congress moving closer to passing a $1.75 trillion infrastructure package. Details are changing by the minute, but it appears that clean energy is going to get a huge boost in the bill. The latest version includes $550 billion for climate-related upgrades, including $320 billion for clean energy and electric vehicles.
While the details are still fluid, it seems clear that clean energy is going to get significant funding if a bill is passed. In one form or another, that should be good for solar energy stocks.
More concretely, Enphase Energy reported earnings, and they were extremely strong. Revenue nearly doubled to $351.5 million, while gross margins fell from 53.2% a year ago to 39.9% on higher raw material costs. But investors are seizing on the growth in Enphase's revenue, which should be a sign of strong growth for the residential solar industry overall.
Sunnova Energy also announced an important EV charging partnership with ChargePoint, a supplier of chargers for homeowners. This is another example of installers integrating solar with energy storage and EV charging, which is increasingly becoming a one-stop offering for residential solar installers.
Now what
The infrastructure package will likely be the biggest news item in the solar industry over the next month or two. Even if a deal passes, it'll take years for money to flow to the industry, so don't expect a boost in earnings today.
What I'm more worried about right now is earnings season. Enphase's results are out, and next week we will get more earnings reports from large solar players. If they're seeing strong growth, it could be a sign of things to come as more people buy EVs and fossil fuel prices climb.
One week isn't a trend, and in the solar industry we can see stocks fall as fast as they rise. But it seems fundamentals are improving, and the next few weeks will give investors a sense of whether this is a move that's going to stick for a while.
