In the trading day following the announcement that Donald Trump was elected U.S. president in the 2024 election, solar stocks took a nosedive.
The Invesco Solar ETF (TAN) fell 11%, major U.S. manufacturer First Solar was down 12%, inverter manufacturers Enphase and SolarEdge pulled back roughly 19%, residential solar installer Sunrun was down 26% and its competitor Sunnova has crashed over 50%. Utility-scale solar tracker manufacturer Nextracker fell about 6.5%, while its competitor Array Technologies has dropped nearly 20%. The solar stock market has broadly continued to dwindle in the wake of the election result.
John Berger, chairman, president and chief executive officer of residential solar and battery energy storage provider Sunnova joined CNBC for “Closing Bell Overtime” to discuss the market fallout, which he believes is divorced from reality.
“The market is out of control in the sense of wildly emotional, lot of speculation,” said Berger.
Sunnova went public under the first Trump administration and hit a share price all-time high of $54 a share during that administration. Since then, high interest rates and regulatory challenges have slowed growth, but the steady rise in electricity prices and increasing electricity demand keep the fundamentals of residential solar strong.
Berger said that the market is reacting fearfully to potential repeals of clean energy tax credits within the Inflation Reduction Act (IRA), but this risk is being overblown. He pointed to the hundreds of billions of dollars in investments in Republican districts that have been generated by manufacturing tax credits within IRA.
“We don’t think the IRA will change much, maybe around the edges a little bit, but it’s been so successful. Looking at domestic manufacturing, which both parties agree with, of solar panels, batteries, inverters, and electric vehicles… About 85% of those capital investments are in Republican districts,” said Berger.
Analysts have generally agreed that the 45X manufacturing tax credit and the 10% domestic content bonus within the IRA are likely to be sustained under a Trump presidency. Bringing back U.S. manufacturing jobs is something both sides of the aisle are supporting.
Raymond James analyst Pavel Molchanov said the fears of tax credit repeal are “overblown.”
As for Sunnova, the company appears to have preemptively altered its business model to thrive in a Trump administration. The company in September required that all new installations contain enough U.S.-made components to qualify for the domestic content bonus, a significant cash generation opportunity for the company.
Berger said that Sunnova may soon move to 100% made-in-the-USA parts, which would not only support the U.S. manufacturing boom by creating demand for U.S. products, but would also insulate the company from tariffs, which have been a central strategy of the Trump administration’s plans.
Today, most solar products are imported to the U.S., largely from Chinese companies. In a tariff-heavy Trump administration, solar components could become a lot more expensive. However, for Sunnova, a fully U.S.-based supply chain essentially makes the company tariff-immune.
“Our company doesn’t buy much that’s not made here anymore, and we’re likely to not buy anything that isn’t made here in the near future,” said Berger.
Despite the recent crash and burn for Sunnova’s stock, Berger remains highly optimistic about the near-term. The company has shifted strategy to slow growth and focus on cash generation to convert on upcoming debt that is due to be paid. The company laid out a cash generation guidance of $100 million in 2024, and that is forecast to balloon to $350 million for 2025 and $400 million in 2026. Some of the cash generation will be attributed to converting tax credits, including the domestic content bonus.
“We’re in a great spot going into what we believe will be a very strong Trump economy,” he concluded.
