Anthony Speciale Stock Market Analyst

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Why This Solar Energy Leader Will Shine in 2022

When you look at the headlines for 2021, it was a spectacular year for the stock market. However, when you really dig in underneath the headlines, the median stock is actually down over 20%.

Most of the return that’s been made in the market comes from the big tech companies and from the energy companies that were on fire through the first half of the year.

Only about 20% of all stocks that have done as well as the market or better, so most stocks either had negative returns or underperformed the broader indexes.

In fact, if you take out some of the bigger, really grossly overvalued, tech stocks, it was quite a mediocre year. A lot of really quality companies with strong fundamentals, excellent businesses and bright futures have been left behind.

And as we head into the new year, I thought it would be a great idea to take a look at some companies that struggled through 2021 but could be poised for spectacular recovery and rebound in 2022.

I’m super bullish on energy. My regular readers should know that. I’m a big believer that traditional energy won’t be replaced by renewable energy until 2050 or beyond. And I have the numbers to back that statement up.

But that doesn’t mean I don’t like renewable energy stocks. In fact, I do, and I own some.

First Solar, Inc.

There is one in particular that I think has not had a great 2021, but I think it could have a fantastic 2022.

And that company is First Solar, Inc. (FSLR), which was down double-digits in 2021. It was very weak in spite of the fantastic outlook for solar energy.

It is going to be a fast-growing source for the generation of electrical power, not just in the US but around the world. And that’s where FSLR does business… Around the world!

However, they are very focused right now on the two highest-growth markets for utility scale projects with the easiest regulatory environments: The US and India. So, they’re really cut back on doing a whole bunch of selling in China. It’s just too competitive, and they’re not big fans of US companies.

Now, Senator Manchin of West Virginia has cast his vote as a “No” to block the Build Back Better bill that had a lot of spending and incentives for solar energy.

I don’t know if they’re going to get the deal done, but I will tell you that we will see more government incentives for solar power in 2022 or beyond whether it comes from that bill or something else.

It’s too popular with the progressive wing of the party, so going into the mid-year elections, they’re going to give them what they want, which is incentives for solar energy.

First Solar doesn’t do rooftops… Instead, the do big, massive utility-scale solar projects. They work with utility companies, real estate developers, large commercial and industrial companies in the US and India where the growth opportunities are.

Now, they’ve been challenged by some supply chain issues just like every other business. Semiconductors are a part of the solar process, so that’s been a problem. But the one edge they have — an additional tailwind and an additional tax incentive — I believe there are going to be huge tax incentives over the next couple of years that will last a very long time for companies to build solar manufacturing facilities in the US.

That’s huge for FSLR, as they already have manufacturing facilities here in the US, and they’re willing to build more.

When you get done with the math of it all, the incentives could be worth about half the current stock price, so you’re basically getting the business at half-price because of these future tax incentives that we will see passed.

Building a solar supply chain within the US is critical to renewable energy achieving the level of production and output that everyone wants to see.

If we can use renewable and solar energy, we should. We’re going to, but just not as fast as everyone is telling you right now. Conventional energy is going to be around for quite some time, but solar energy is going to grow really fast. ESG policies are going to help that along.

A lot of larger companies are going to look at turning to solar power and buying their own solar facilities, having FSLR come out and build it for them, in order to increase their ESG scores.

ESG scores are going to get tied into institutional share-buying by some endowments, some corporations and lots of pension funds. And ESG is going to be a driver of business for FSLR in 2022 and well beyond.

The solar industry, and FSLR in particular, have a number of tailwinds that are going to push the company’s earnings and revenue higher, which should bring buyers back into the stock.

And I think FSLR can go from having a very disappointing 2021 to having a spectacular 2022 and becoming a momentum leader in the US market before the year is over.