Shares of residential solar installer SunPower (SPWR 5.85%) jumped 10.6% on Monday as the renewable energy market rallied to start the week. Shares were still up 6% at 12:30 p.m. ET and have been volatile in trading.
SunPower stock finds a bottom
Over the last few weeks, SunPower and a lot of its competitors and suppliers have started to bottom out in the market. Rising interest rates have been a headwind for the entire residential solar industry this year and that's caused companies like SunPower to lower 2023 guidance for both the rate of installations and the margin of each installation.
But there are still tailwinds behind the industry. Rooftop solar costs are expected to fall in the next couple of years as component costs drop and installers get more efficient and face fewer labor shortages. And falling inflation is helping. But falling interest rates will help on the financing side. That's why investors are bidding up SunPower as the 10-year U.S. bond yield has fallen 29 basis points in the past month.
Brighter skies ahead?
As bad as 2023 was for solar stocks, the business is still in good shape long-term. The industry just needs to adjust to higher rates and the impact of net metering 3.0 in California, which is by far the biggest solar market in the U.S.
However as these short-term challenges are overcome, the industry will benefit from falling component costs, improving efficiencies, and a steady rise in electricity rates. For today, investors are seeing the bullish side of the industry in SunPower.
