Broadly speaking, tech stocks are volatile. That has been doubly true with solar stocks, which tend to rise and fall in tandem rather than based on individual company performance. There is some justification to lumping solar companies together in this way, because they are often subject to many of the same risks while also reaping many of the same benefits through subsidies. Indeed, we’re supposed to be living in the golden age of green technology with initiatives like the U.S. Inflation Reduction Act (IRA) and European Green Deal offering billions of dollars in tax credits, loans, and grants. Instead, solar stocks are down nearly 30% in 2023 based on the year-to-date performance of the Invesco Solar ETF (TAN), a pure-play solar fund.
Why are solar stocks lagging? Some of it is attributable to individual performances. The three top holdings in TAN – Enphase Energy (ENPH), First Solar (FSLR), and SolarEdge (SEDG) – account for roughly 30% of the fund’s holding. Big swings in any of these stocks will certainly drag down the rest. In fact, both Enphase and SolarEdge are down more than 50% this year, following their last quarterly earnings reports in August. Analysts apparently did not like some of the underlying metrics around revenue and earnings for both companies.
