With oil prices near multiyear lows, solar stocks have taken a hit over the last few months. Despite the extension of the Investment Tax Credit, most solar stocks are in the red in 2016. That being said, renewable energy will continue growing at a rapid speed in the coming years. As a result, long-term investors should see this weakness as an opportunity to buy depressed solar stocks like Canadian Solar (CSIQ, Financial)
Solar is thriving
Numerous solar bears claim that truncated oil and gas prices are killing the need for renewable energy. Consequently, they are not aware of the situation that arose in 2014, when crude oil prices plunged around one-third in contrast to the dollar, and renewable sources of energy covered a higher share of new dimensions than conventional sources for the first time ever, demonstrating that renewable source companies are becoming more attractive to energy purchasers as compared to fossil fuels.
Additionally, Bloomberg estimates that, despite the declining oil prices (20% year to date), renewables' share of new capacity will marginally surge in 2016. Solar cells accounted for around 30% of renewable capacity in 2014, and there is profitable logic for this. Since 2008, the price of PV (cell) modules has plummeted around 30% annually and is on an ascending path to gauze uniformity.
In the meantime, PV module prices have plunged by 99%. In the previous nine years, Photovoltaic installations have amplified 36% on a yearly basis and are projected to almost double from 55 GW previous year to 102 GW in 2022.
Preceding Dec. 15, solar companies involved in the U.S. were ready for a stroke as tax credits for Photovoltaic installations were fixed to descend from 30% to 10% in 2016, but Congress remarkably protracted the credits up to 2021.
Manufacturing capacity tactic
The worldwide solar industry is starting to experience much improved desire, which is the thing of which the company is trying to take advantage. While much of solar's progress over the past 10 years has been motivated by oversupply, growth is continuously being driven by organic requirement. Keeping in mind the existing environment, it is not at all essential for solar firms to embrace traditional expansion models. On the other hand, Canadian Solar is moving on the right track by chasing a more belligerent and tactical capacity expansion model.
Recently, the company had strategies to surge its solar cell, wafer and module producing capacity to 3.4 GW, 1 GW and 5.33 GW this year compared to its existing solar cell, wafer and module capacity of 2.5 GW, 0.4 GW and 4.33 GW.
Considering the company’s existing solar cell, wafer and module capacity, the company is visibly pursuing a striving growth tactic. Apart from this, the company is thinking cleverly about where to place its additional manufacturing capacity. For example, the company plans to construct a 400 MW cell producing plant in Southeast Asia, which will probably be a key solar producing area for the future.
Conclusion
I am a firm believer that the solar industry will grow significantly over the coming years. Investors can pick many beaten-down stocks from the sector to bet on, but Canadian Solar is one of my favorite picks. With the stock down almost 30% YTD, investors can consider buying it at its current valuation.
