Over the past few years, climate change has become one of the biggest global trends. Governments around the globe are now taking action by rolling out extensive plans to shift towards complete renewable energy grids. Solar has emerged as the clear leader of all types of renewable energy due to rapidly dropping prices, ease of installation/maintenance, and its ability to be harnessed in a decentralized manner.
Let’s look at some of these Canadian solar stocks, companies lighting the way for solar in Canada, and how they look as investment opportunities.
You can also check out our complete Canadian renewable energy company stocks list.
What's in the Article:
- Why You Should Invest in Solar Stocks in Canada
- Best Canadian Solar Stocks
- Small-Cap Solar Penny Stocks in Canada
- What Do Canadian Solar Companies Do?
- Will You Buy Solar Stocks in Canada?
Why You Should Invest in Solar Stocks in Canada
The rate at which solar panels are becoming cheaper had far outperformed analyst expectations in the early 2000s when solar had just started gaining steam. Over the past decade, solar panel costs have decreased by 90%, while production has grown at a CAGR of 25%. As a result, the annual global solar market is projected to surpass $200 billion over the next five years. As a result, we believe solar stocks deserve a place in every investor’s portfolio.
Investing in solar companies and stocks in Canada can be an appealing option due to several factors contributing to the growth potential of the solar energy industry in the country. Here are some key reasons to consider investing in solar companies and stocks in Canada:
- Growing Renewable Energy Market: The solar energy sector is a part of the broader renewable energy market, which continues to gain traction as the world shifts towards sustainable energy technologies. Investing in solar companies allows you to tap into this emerging market category and be a part of the transition from traditional energy sources to cleaner alternatives.
- Favourable Government Policies and Incentives: The Canadian government has strongly supported renewable energy, including solar power, through various policies, incentives, and initiatives. These measures aim to increase the adoption of solar energy and reduce greenhouse gas emissions. Investing in solar companies can benefit from these favourable regulatory frameworks, which create a conducive environment for growth.
- Declining Costs and Technological Advancements: The cost of solar panels has significantly decreased over the years, making solar energy more economically viable. At the same time, advancements in solar technologies have improved efficiency and reliability. These factors contribute to the growing competitiveness of solar power and the potential for higher returns on investments in solar companies.
- Increasing Demand and Market Potential: The demand for clean and renewable energy sources, including solar power, is rising globally. This demand is driven by environmental concerns, energy security, and the need to diversify energy sources. Canada’s vast landmass and favourable solar conditions provide ample opportunities for solar energy generation and expansion. Investing in solar companies positions you to capitalize on Canada’s growing market potential for solar power.
- Financial Performance and Growth Prospects: Some Canadian solar companies have demonstrated strong financial performance and growth prospects. For example, Canadian Solar Inc. has reported revenue growth and higher-than-expected earnings per share. Investing in companies with solid financials and growth potential can provide attractive investment returns.
Best Canadian Solar Stocks
Here are the best stocks for investors in Solar energy plays;
Canadian Solar (NASDAQ: CSIQ)
Canadian Solar is a Guelph, Canada, headquartered solar panel manufacturer. Canadian Solar is a completely vertically integrated company and operates 17 production facilities across the globe. Canadian Solar has 14 GW of module capacity, 5 GW of silicon wafer capacity, and 10 GW of solar cell capacity. The company shipped 11.3 GW of solar equipment in 2020.
Along with solar equipment manufacturing, Canadian Solar is also involved in battery-based energy storage products with a 9GWh projects pipeline. Industrial and government projects make up most of the company’s revenue. Canadian Solar is a highly efficient company with near zero-bad debt on credit sales, low inventory, and negative cash conversion. The company also enjoys a competitive advantage as it operates one of the largest direct sales channels in the solar sector, leading to higher margins.
The company has projected 2021 guidance of $5.6-$6 billion (up 60%-71.4%) in 2020 with total shipments of 18MW-20MW (up 59%-76.9% in 2020) and battery shipment guidance of 810MWh-860MWh. Assuming FY20 margins, profits should be $235-$250 million for FY21 (up 59%-71%).
Brookfield Renewable Partners (TSE: BEP.UN)
Brookfield Renewable Partners is promoted by the major global private equity firm Brookfield Partners. The firm operates a global portfolio of renewable energy assets spanning all significant types: hydro, wind, solar, and renewable energy storage facilities. Brookfield Renewable Partners has $59 billion of power assets under management and nearly 6000 power facilities. In addition, the group has a total development pipeline of over 23 GWh.
The group mainly focuses on building power assets at strategic locations at economically favourable times. Over time the group recycles assets by selling mature assets and using proceeds from the sale and new issues to expand its portfolio. Compared to others on this list, Brookfield Renewable offers investors a diverse asset base regarding geography and type of energy generation.
2020 the group generated 42 GWh of renewable energy across all assets. In Q1 2021, the company reported a 190% increase in FFO (Funds from Operations), with FFO from solar assets increased 275% after it acquired Terraform Power, a major US solar manufacturer, for vertical integration. As such, they are one of the largest utility providers in Canada as well, through their holdings.
Innergex Renewable Energy Inc. (TSX: INE.TO)
Innergex Renewable Energy is a leading Canadian renewable power producer with a diverse portfolio of solar, hydro, and wind projects. The company has a track record of delivering solid financial performance and generating stable cash flows. Innergex’s strategic focus on expanding its solar energy assets positions it well to capitalize on Canada’s growing demand for clean energy.
The company’s disciplined approach to project development and strong balance sheet make it an attractive investment option for those seeking exposure to solar energy generation.
Northland Power Inc. (TSX: NPI.TO)
Northland Power is a Canadian power producer that operates a diverse portfolio of renewable energy projects, including solar, wind, and natural gas facilities. The company has a strong track record of financial performance, driven by its long-term power purchase agreements and a focus on sustainable growth.
Northland Power’s solar projects contribute to its overall renewable energy generation capacity and provide a solid foundation for future growth. With a robust project pipeline and a commitment to expanding its renewable energy portfolio, Northland Power is well-positioned to benefit from the increasing adoption of solar energy in Canada.
First Solar (NASDAQ: FSLR)
First Solar is the largest manufacturer of solar equipment in the United States. First Solar operates three solar panel fabrication plants worldwide with a total annual production capacity of 6.7 GW. The company shipped 5.5 GW in 2020. First Solar has a market cap of $8.54 billion and a P/E of just 16.6.
First Solar operates on a B2B business model, focusing on utility-scale and commercial installation. Focusing on commercial and utility-scale clients allows the company to offer end-to-end solutions that include equipment and its installation, maintenance, and financing, thus generating higher margins than those in the ultra-competitive panel market. In addition, First Solar enjoys a competitive technological advantage over peers due to its proprietary Cadmium-Telluride semiconducting film technology, a market leader in efficiency. As a result, the company has projected 2021 financial guidance of $3 billion in revenues (up 10% on 2020), EPS of $4.05-$4.75(up 10%-27% on 2020) and shipments of 7.8-8 GW (up 41%-45% on 2020).
Eguana Technologies Inc. (EGT.V)
Eguana Technologies is a leading intelligent energy storage systems and power controls provider. The company’s solutions enable the integration of solar power and energy storage, optimizing energy generation and consumption. Eguana Technologies has shown strong financial performance, driven by its expanding customer base and increasing market penetration.
The company’s market position as a provider of advanced energy storage solutions positions it well to capitalize on the growing demand for integrated solar power systems in Canada.
SolarEdge Technologies (NASDAQ: SEDG)
SolarEdge is an Israel-based but US-domiciled producer of ancillary solar products. Their products include solar inverters, power optimizers, and power generation monitoring systems. SolarEdge has manufacturing facilities in Hungary and China. The company has a market cap of $12.7 billion and a P/E of 102.
SolarEdge operates in a highly competitive market with competitors such as Enphase Energy, who have been chipping away its market share in the US. However, SolarEdge derives little more than 2/3 of its revenue from international markets, mainly Europe, where it has achieved significant growth. This is because the EU’s political stance on renewable energy is very strong.
In Q1 2021, the company outperformed projections with revenues of $405 million (up 6% in 2020), while the solar segment was up 15% in 2020. For Q2, the company expects revenues of $445-$465 million (up 9.8%-14% on Q1) with solar revenue growth of between 7.7%-11.7%. The company has been growing very well in APAC regions such as Australia, where they recorded sequential quarter growth of 50%. The company expects sequential quarterly growth over the rest of the year of 35%. The company is entering the residential battery business this quarter and expects meaningful revenues from Q3. Management expects the battery business to add between $100-$150 million in FY21, with a more significant contribution from next year onwards.
Small-Cap Solar Penny Stocks in Canada
Here are some small-cap Solar penny stocks that are high risk but potentially high rewards opportunities for investors –
UGE Inc (CVE: UGE)
UGE is a New York-based end-to-end solar solutions provider. UGE has developed over 700 MW of projects over the past decade. The company has recently changed its business model from develop and flip to develop and hold. The company has two main lines of business, the first being development of solar projects for ownership by UGE and the second being fee income for turn-key solar solutions for customers. The company has a resilient business model as revenues from solar projects are very predictable, thus allowing the company to borrow against revenues from existing projects to fund expansions without taking too much risk or expensive debt. Furthermore, the company has a very asset-light business model.
In the year’s first quarter, the company reported revenue growth of 59% and a gross margin of 23%. UGE currently has an order backlog of $130 million and has plans to scale power assets and annual project development capacity to 100MW by 2024. According to the company, each MW provides between $0.5-$1 million in net asset value and $200,000 in annual recurring revenue. Thus, the projected 2024 asset value is $100 million, and yearly solar revenue is $20 million compared to current solar assets of $1.2 million and solar revenues of just $26000. Therefore, the company can be a multi-bagger if it successfully executes its plan.
Aurora Solar Technologies (ACU.V)
Aurora Solar Technologies produces industrial equipment used in the large-scale manufacturing of solar panels called in-line quality control systems. As solar cell manufacturing is a complex process, the company’s products help manufacturers detect variations and faults in the assembly line. To do this, the company’s infrared spectroscopy sensors linked to proprietary software are fitted along the assembly line, thus allowing real-time quality control.
Aurora has a unique revenue model; it charges customers between 5%-10% of the cost savings delivered by its product. Unfortunately, the company was severely hit during the pandemic and posted a $1.3 million loss in FY20. The company claims savings of $10 million for each customer per year, translating to $0.5-$1 million in revenue per customer for Aurora. The company recently got its first customers, and their claims of revenues will be tested over the next few quarters. Investors should keep an eye on this one.
Clear Blue Technologies International (CBLU.V)
Clear Blue Technologies is a manufacturer of turn-key off-grid wireless power solutions. The company’s products, known as mission-critical devices, are vault-shaped devices with a deployable solar array on top and a battery inside. Their products are commonly used in obscure areas with no power infrastructure, such as forests, mining sites, and deserts. The use case is typically for powering 5G towers, satellite internet ground stations, obscure surveillance equipment, etc. Their products come with device management software that allows owners/users to configure and operate the device anywhere.
The company recently announced deals in the US to power streetlights on obscure roads and a slew of trial orders from telecom operators in African countries like Uganda and Nigeria.
Clear Blue was profitable in 2020 despite the pandemic and grew its revenues by 45% YoY in Q1 2021, and it’s Trailing Twelve Month revenues are up 87%. In addition, the company has a high gross margin of 31.5%. As a result, we believe this is an excellent microcap bet for investors as Clear Blue doesn’t have to compete on price due to a differentiated offering and has superior headroom to grow.
Solar Alliance Energy (SOLR.V)
Solar Alliance Energy is a Canadian solar energy company focused on developing, installing, and operating residential, commercial, and industrial solar projects. The company’s financial performance has shown steady improvement, driven by its expanding project pipeline and growing customer base.
Solar Alliance Energy’s expertise in solar installation and its commitment to innovation position it well to capitalize on the growing demand for solar panels in Canada. As more businesses and homeowners adopt solar energy solutions, Solar Alliance Energy benefits from its market position and growth potential.
What Do Canadian Solar Companies Do?
Sub-sectors of solar energy in Canada:
- Solar Panel Manufacturing: Canadian companies produce photovoltaic (PV) modules, converting sunlight into electricity.
- Solar Power Generation and Installation: Companies develop, construct, and operate solar farms and rooftop installations.
- Solar Energy Services and Solutions: Companies provide services like consulting, system design, financing, maintenance, and storage solutions.
- Solar Component Suppliers: Companies supply inverters, batteries, mounting systems, and tracking systems for solar power systems.
- Solar Research and Development: Canada’s research institutions and specialized companies focus on advancing solar energy technologies.
Fuel cell companies in Canada may also be working in the solar energy storage industry.
Will You Buy Solar Stocks in Canada?
Investing in solar companies in Canada offers a compelling opportunity to participate in the country’s growing solar energy industry. With favourable government policies, declining costs, and increasing market demand, the solar sector in Canada has significant growth potential.
Whether through solar panel manufacturing, power generation and installation, energy services and solutions, component supply, or research and development, each sub-sector contributes to expanding solar energy capacity in Canada.
By carefully evaluating solar companies’ financial performance, market position, and growth prospects, investors can make informed decisions and potentially benefit from the ongoing transition to clean and renewable energy sources. Investing in solar companies in Canada aligns with sustainable investment principles and supports the country’s commitment to reducing greenhouse gas emissions and creating a more environmentally friendly energy landscape.
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