3 Solar Stocks to Watch Amid Policy and Tariff Headwinds

The U.S. solar demand remains strong as utilities, businesses and households increasingly adopt solar-plus-storage systems to support decarbonization, grid resilience and rising clean power needs. However, near-term challenges have intensified following the One Big Beautiful Bill Act, which scaled back Inflation Reduction Act tax credits and introduced new Foreign Entity of Concern requirements, adding policy uncertainty and procurement complexity. Despite these headwinds, industry fundamentals remain resilient. A few prominent players in this industry that solar investors may like to watch are Sunrun RUN, Canadian Solar CSIQ and Tigo Energy, Inc. TYGO.  

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 from the U.S. Energy Information Administration (“EIA”), solar’s share of U.S. electricity generation will be 8% in 2026 and 9% in 2027. It remains the nation's dominant form of new generating capacity.

3 Trends Shaping the Future of the Solar Industry

Strong Demand and Lower Rates Power Solar Growth Outlook: Utilities, businesses and households are increasingly adopting solar power — especially systems paired with battery storage — to advance decarbonization, strengthen energy resilience and protect against rising electricity prices. According to the Solar Energy Industries Association (“SEIA”), despite evolving market dynamics and policy shifts in 2025, solar is expected to remain the leading source of new electricity generation capacity added to the grid over the next five years. SEIA expects nearly 44 GWdc of capacity to be installed in 2026, with annual additions moderating to roughly 38-39 GWdc between 2027 and 2030. Per a report from the U.S. EIA, growing electricity demand will be met mainly through increased solar electricity generation. EIA expects a 17% increase in solar generation in 2026 and an additional 23% increase in 2027. Such strong growth indicators and declining project bottlenecks should bode well for U.S. solar stocks. 

Solar projects — especially utility-scale and residential solar-plus-storage — are capital-intensive and heavily financed with debt. Declining interest rates reduce borrowing costs, thereby improving project economics and overall returns. The U.S. Federal Reserve currently maintains a benchmark rate in the 3.50-3.75% target range following several rate cuts. Lower financing costs can help accelerate project approvals and support faster construction activity across the sector.

Regulatory Friction Rises, Yet Industry Fundamentals Remain Strong: The U.S. government has recently implemented several policy measures that may create near-term headwinds for the nation’s solar industry, with the most consequential being the One Big Beautiful Bill Act (OBBBA). Signed into law in July, the OBBBA sharply curtails a number of federal tax credits established under the Inflation Reduction Act and introduces new Foreign Entity of Concern (FEOC) requirements that could restrict access to key components and supply chains. According to SEIA’s December 2025 report, the industry has spent the months following the bill’s passage adjusting to a policy landscape that remains fluid and far from settled. Developers continue to face uncertainty around federal permitting decisions and detailed Treasury guidance on FEOC compliance is still expected to take months to materialize. As a result, planning and procurement have become more complex. Even so, SEIA’s base-case outlook suggests 246 GWdc of total solar installations through 2030. This indicates that long-term demand remains resilient despite the new challenges.

Rising Tariff Pressures Strain Solar Economics: The heightened U.S. tariffs on imported goods have been negatively impacting nearly all industries, and solar is no exception. As expected, these tariffs have increased manufacturing costs for solar companies, which were already grappling with raw-material shortages due to global supply-chain challenges. According to the SEIA report, module prices fell an average of 12% year over year across all segments, caused by expanded manufacturing capacity and higher-output Topcon cell technology. 

SEIA also mentioned that commercial system pricing rose 9% in the third quarter of 2025, primarily due to a 50% year-over-year surge in balance-of-electrical-system and racking costs, which more than offset savings from cheaper modules. Utility-scale costs also climbed — fixed-tilt systems increased 9%, while single-axis tracking systems rose 10%. These increases stem largely from an 8% rise in balance-of-electrical-system costs tied to new commodity tariffs. Labor costs rose 15% year over year, and EPC overhead and margins jumped nearly 40%, reflecting greater project risk amid ongoing policy and tariff uncertainty.

Zacks Industry Rank Reflects Gloomy Outlook

The Zacks Solar industry is housed within the broader Zacks Oils-Energy sector. It currently carries a Zacks Industry Rank #143, which places it in the bottom 41% of more than 243 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 outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is due to a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential over the past few months. The industry’s bottom-line estimate for the current fiscal year has moved down 12.4% to $1.70 since Nov. 30.

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 Beats Sector & S&P 500

The solar industry has outperformed both its sector and the Zacks S&P 500 composite over the past year. The stocks in this industry have collectively increased 40.4% in the past year, while the Oils-Energy sector rose 34.6%. The Zacks S&P 500 composite has surged 19.4% in the same time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of the trailing 12-month EV/EBITDA, which is commonly used for valuing solar stocks, the industry is currently trading at 5.94X compared with the S&P 500’s 17.73X and the sector’s 6.48X.

Over the past five years, the industry has traded as high as 39.17X, as low as 4.40X and at the median of 15.63X.

EV-EBITDA Ratio (TTM)

3 Solar Stocks to Watch

Canadian Solar: Based in Kitchener, Ontario, Canada, the company is one of the leading manufacturers of solar PV modules and a provider of solar energy and battery energy storage solutions. On Feb. 24, 2026, CSIQ’s subsidiary, Recurrent Energy, completed the sale of its 200 MWh Fort Duncan Battery Storage facility. This transaction supports Canadian Solar’s capital-recycling strategy, allowing it to monetize completed assets and reinvest proceeds into higher-return solar and storage projects within its global pipeline.

The Zacks Consensus Estimate for Canadian Solar’s fourth-quarter 2025 earnings per share (EPS) indicates an increase of 25.2% year over year. The consensus estimate for 2025 earnings has improved 37.1% over the past 60 days. It currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

Price & Consensus: CSIQ

 

Tigo Energy: Based in Campbell, CA, the company is a provider of intelligent solar and energy storage solutions. Tigo Energy is set to benefit from the launch of its next-generation software-enhanced Tigo GO Battery in North America. The improved GO Battery is expected to strengthen its product lineup with faster installation, reduced space requirements, modular scalability and broader compatibility with its existing solar-plus-storage solutions. These enhancements can help the company grow sales and deepen market penetration in the residential energy storage segment. 

The Zacks Consensus Estimate for Tigo Energy’s 2026 sales indicates an improvement of 28% from the prior-year reported figure. The consensus estimate for 2026 EPS indicates an increase of 116.7% from the prior-year reported figure. It currently carries a Zacks Rank of 3.

Price & Consensus: TYGO

 

Sunrun: Based in San Francisco, CA, the company develops, owns, manages and sells residential solar energy systems. On Feb. 26, 2026, the company announced its fourth-quarter results. Sunrun’s storage attachment rate was 71% in the fourth quarter, up from 62% in the prior-year period. The company has installed more than 237,000 storage and solar systems, representing nearly four gigawatt-hours of Networked Storage Capacity. During the fourth quarter, the company repaid $81 million of recourse debt, reducing its borrowings under its working capital facility.

The Zacks Consensus Estimate for Sunrun’s 2026 sales indicates an improvement of 1.2% from the prior-year reported figure. The consensus estimate for 2026 earnings has improved 400% in the past 60 days. The company currently carries a Zacks Rank of 3.  

Price & Consensus: RUN

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Sunrun Inc. (RUN): Free Stock Analysis Report
 
Canadian Solar Inc. (CSIQ): Free Stock Analysis Report
 
Tigo Energy, Inc. (TYGO): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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