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About the Industry
The Zacks Solar industry can be fundamentally categorized into two groups of companies. While one is involved in designing and producing high-efficiency solar modules, panels and cells, the other is engaged in installing grids and, in some cases, entire solar power systems. The industry also includes a handful of companies that manufacture inverters for solar power systems, which convert solar power from modules into electricity required by electric grids. Per a report by the Solar Energy Industries Association (“SEIA”), published in March 2025, photovoltaic (PV) solar accounted for 66% of the new electricity-generating capacity added to the U.S. grid in 2024. Hence, it remains the nation's dominant form of new generating capacity.
3 Trends Shaping the Future of the Solar Industry
Record Solar Installations Boost Prospects: The U.S. solar industry has been witnessing a solid installation trend lately. As reported by SEIA, the U.S. solar industry installed approximately 50 gigawatts-direct current (GWdc) of new solar capacity during 2024, reflecting a solid 21% year-over-year increase. We expect to witness similar robust solar growth in the United States in the near term as well.
To this end, the U.S. Energy Information Administration (“EIA”) expects to add 32 GW of solar generation capacity in 2025. This new capacity is projected to lead to a 73 billion kWh (33%) increase in U.S. solar generation in 2025, followed by a 54 billion kWh (19%) increase in 2026. Such impressive projections are indicative of a bright outlook for U.S. solar stocks.
Inflation Reduction Act to Work as a Growth Catalyst: The historic Inflation Reduction Act (“IRA”), passed in August 2022, has been a solid growth catalyst for U.S. solar stocks. Following IRA's enactment, actual investment in clean energy technologies and infrastructure improved a solid 71% to $493 billion (as per the Clean Investment Monitor Report) during the second half of 2022 to the first half of 2024. Moreover, global investment in the energy transition hit $2.1 trillion in 2024, up 11% from 2023 and set a new record (as per a BloombergNEF report). To this end, SEIA stated that the long-term tax incentives and manufacturing provisions in the IRA provide the certainty needed to boost expected solar deployment by more than 40% (from 2027 to 2032) compared to pre-IRA projections. This, in turn, should continue to boost U.S. solar stocks’ growth trajectory in the near term.
Macroeconomic Challenges Might Hurt: Recent macroeconomic challenges in the U.S. economy have been negatively impacting the solar industry. In particular, the residential solar space has been reflecting signs of continued struggles over the past couple of quarters. Keeping up with this trend, in 2024, residential solar installations in the United States tanked 32% year over year. This was the segment’s lowest year of installed capacity since 2021, affected by company bankruptcies, sustained high interest rates, and consumer hesitancy ahead of the 2024 election. Looking ahead, SEIA projects growth in the residential solar segment to remain flat in the next five years due to multiple issues like broader power sector challenges, a lack of labor availability, high voltage equipment constraints and interconnection delays.
China’s dominance in solar module manufacturing is another major headwind for U.S. solar stocks. With China accounting for 80% of global module capacity, the country's oversupply of solar panels has been putting significant downward pressure on module pricing in the United States in recent times. As a result, U.S. module manufacturers are facing a cost competitiveness challenge, with solar PV manufacturing costs in China being 20% lower than in the United States (as per a report by the International Energy Agency). While America is making efforts to support its domestic solar module industry, it faces difficulty competing against cheaper modules offered by China. This might have some adverse impact on the profitability of the U.S. solar industry in the near future.
Zacks Industry Rank Reflects Grim Outlook
The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #141, which places it in the bottom 42% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects.
Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few solar stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector & S&P 500
The solar industry has underperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively lost 45% in the past year, while the Oils-Energy sector lost 1.5%. The Zacks S&P 500 composite has surged 6.8% in the same time frame.
One-Year Price Performance
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Industry's Current Valuation
On the basis of a trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 11.54X compared with the S&P 500’s 16.47X and the sector’s 4.77X.
Over the past five years, the industry has traded as high as 49.49X, as low as 9.01X and at the median of 25.48X, as the charts show below.
EV-EBITDA Ratio (TTM)
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3 Solar Stocks Worth Watching
Nextracker: Based in Fremont, CA, the company is a provider of intelligent, integrated solar tracker and software solutions used in utility-scale and distributed generation solar power plants. On Jan. 1, 2025, Nextracker released its third-quarter fiscal 2025 results. The company reported a record backlog, which increased to significantly greater than $4.5 billion, supported by robust demand in all key regions for the company with meaningful contributions from new products.
The Zacks Consensus Estimate for NXT’s fiscal 2025 earnings has improved 19.7% over the past 60 days. The Zacks Consensus Estimate for fiscal 2025 sales indicates an improvement of 14.2% from the prior-year reported figure. The company currently carries a Zacks Rank #2 (Buy).
Price & Consensus: NXT
Tigo Energy Inc.: Based in Campbell, CA, the company is a provider of intelligent solar and energy storage solutions. On March 24, 2025, Tigo Energy announced that Delta Networks, a global provider of power and thermal management solutions, has licensed Tigo’s rapid shutdown technology for its rapid shutdown products. Under the agreement, Delta products are authorized to use technologies described in various Tigo patents related to rapid shutdown.
The Zacks Consensus Estimate for 2025 sales indicates an improvement of 57.5% from the prior-year reported figure. The consensus estimate for 2025 earnings has improved over the past 60 days. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: TYGO
Enphase Energy: Based in Fremont, CA, the company designs, develops, manufactures and sells home energy solutions that connect energy generation, energy storage and control and communications management on a single intelligent platform. On March 11, 2025, Enphase Energy announced the production shipment of its newest electric vehicle (EV) charger, the IQ EV Charger 2, to 14 European markets. The IQ EV Charger 2 is a smart charger designed to work seamlessly with Enphase solar and battery systems or as a powerful standalone charger.
The stock delivered an earnings surprise of 25.33% in the last reported quarter. The Zacks Consensus Estimate for 2025 sales indicates an improvement of 15.6% from the prior-year reported figure. The company currently carries a Zacks Rank #3 (Hold).
Price & Consensus: ENPH
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This article originally published on Zacks Investment Research (zacks.com).
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