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Solar stocks have lost value since Trumps election, but John Berger, CEO of residential solar provider Sunnova, believes the market is misreading the industrys strength under the Trump administration.
Solar stocks plummeted in the trading session following the announcement that Donald Trump had been elected US president in the 2024 election .
The Invesco Solar ETF (TAN) fell 11%, major U.S. manufacturer First Solar was down 12%, inverter makers Enphase and SolarEdge were down about 19%, residential solar installer Sunrun was down 26% and competitor Sunnova was down more than 50%. Solar tracker maker Nextracker was down 6.5%, while competitor Array Technologies was down nearly 20%. Overall, the solar stock market has continued to decline following the election result.
John Berger, president and CEO of residential solar and battery storage provider Sunnova, appeared on CNBCs "Closing Bell Overtime" to discuss the market downturn, which he believes is out of touch with reality.
"The market is out of control in the sense that it is very emotional and speculative," Berger said.
Sunnova went public under the first Trump administration and reached an all-time high price of $54 per share during that administration. Since then, high interest rates and regulatory challenges have slowed growth, but steadily rising electricity prices and growing electricity demand keep residential solar fundamentals strong.
Berger said the market is reacting with fear to the potential repeal of clean energy tax credits within the Inflation Reduction Act (IRA) , but this risk is being overstated. He pointed to the hundreds of billions of dollars in investments in Republican districts that have been generated by the manufacturing tax credits within the IRA.
“We don’t think the IRA is going to change much, maybe a little bit around the edges, but it’s been very successful. If you look at domestic manufacturing, which both parties agree on, of solar panels, batteries, inverters and electric vehicles… About 85% of those capital investments are in Republican districts,” Berger said.
Overall, analysts agree that the 45X manufacturing tax credit and the 10% domestic content bonus within the IRA are likely to remain in place under a Trump presidency. Bringing back American manufacturing jobs is something both sides of the partisan aisle are supporting.
Raymond James analyst Pavel Molchanov said fears of a tax credit repeal are "overblown."
As for Sunnova, the company appears to have preemptively altered its business model to thrive in a Trump administration. In September, the company required that all new facilities contain enough U.S.-made components to qualify for the domestic content bonus, a major cash-generating opportunity for the company.
Berger said Sunnova could soon move to 100% U.S.-made parts, which would not only support the rise of American manufacturing by creating demand for American products but also insulate the company from tariffs, which have been a central strategy of the Trump administration’s plans.
Today, most solar products are imported into the United States, largely from Chinese companies. Under a tariff-laden Trump administration, solar components could become much more expensive. For Sunnova, however, an all-American supply chain makes the company immune to tariffs.
"Our company doesnt buy much that isnt made here anymore, and we probably wont buy anything that isnt made here in the near future," Berger said.
Despite the recent drop in Sunnova shares, Berger remains very optimistic about the near term. The company has shifted its strategy to slow growth and focus on cash generation to address outstanding debt. The company has set cash generation guidance of $100 million in 2024, which is expected to increase to $350 million in 2025 and $400 million in 2026. Part of the cash generation will be attributed to the conversion of tax credits, including the local content bonus.
"We are in an excellent position to face what we believe will be a very strong Trump economy," he concluded. |
