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Stock Analyst Update

Solar Stocks Set to Jump as Biden Provides Tariff Reprieve

Despite the positive news, we view most solar-related stocks to be fairly valued across our coverage list.

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Solar stocks are set to jump on June 6 after reports the Biden administration will announce actions to alleviate uncertainty associated with tariffs on imported solar panels. The Biden administration is expected to provide a two-year halt to new solar tariffs, providing much-needed near-term certainty for developers.

We note many industry participants have delayed projects as they awaited clarity on the tariffs. Additionally, President Joe Biden plans to use the Defense Production Act to provide support for U.S.-made solar panels. We view these actions as aimed at balancing continued buildout of solar projects in the near term to support decarbonization goals, while looking to increase U.S. solar manufacturing over time.

China’s dominance of solar panel manufacturing—and U.S. manufacturers’ allegations of unfair trade practices—have driven a series of on-again, off-again trade disputes for much of the past decade. While this latest action does not solve the issue indefinitely—it’s a two-year reprieve only—we expect the issue to dissipate over time. A combination of increased domestic panel manufacturing, such as First Solar’s (FSLR) large expansion, and growing geographic diversification of upstream solar panel raw materials, such as polysilicon wafer production, are likely to lead to a much more diversified supply base. This trend is a driver behind our Positive Moat Trend on First Solar.

Despite the positive news, we view most solar-related stocks to be fairly valued across our coverage list. We did not make fair value changes when the original tariff inquiry was announced; thus, we do not anticipate making material revisions with this action. While policy questions remain in certain corners of the solar market, such as residential net metering, we expect the focus to shift to the macro environment and the potential positive implications of the high energy price environment.

Brett Castelli does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.