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Solar stocks declined Tuesday, building on recent weakness as companies warn of the impact of supply chain bottlenecks and parts shortages.
The Invesco Solar ETF, which is tracking the space, was down 7%, bringing its one month decline to 15%.
SolarEdge was the largest detractor on the fund, down 15%. The company reported a profit on Monday night after the bell. While the company’s results exceeded analysts’ expectations on both the upper and lower levels, SolarEdge warned of future margin erosion due to higher shipping costs.
“Ocean freight prices have increased more than 100% in the past few months, and our pre-negotiated prices have gradually expired, exposing us to higher freight costs worldwide,” said Zvi Lando, CEO of the company, in the call for results.
However, the company found it had enough supply to meet demand in the second half of the year. This is in contrast to competitor Enphase Energy, who said last week that global chip shortages would constrain its supplies in the second quarter.
Semiconductors are key components for both battery storage systems and solar inverters. The shortage has also hit the auto industry, with companies like GM and Ford stopping production at several plants, among others.
SolarEdge’s weakness spread to the rest of the sector on Tuesday as investors fear companies will not be able to keep up with record demand.
Solar stocks under pressure
Enphase and SunPower each fell more than 7%. Sunrun and Sunnova lost 10% and 8%, respectively.
Sunnova reported first quarter results on April 28 with adjusted estimates of adjusted EBITDA. The company also stated that it had stored parts in anticipation of fears of bottlenecks. Still, stocks are down more than 20% over the past week.
SunPower and Sunrun are expected to show profits on Wednesday.
Some Wall Street analysts remain positive on the sector, noting that the longer-term outlook remains strong despite short-term headwinds.
“We are encouraged by demand trends and believe that long-term investors should buy stock weakness before supply restrictions are likely to improve in the coming quarters,” said JPMorgan.
The group was also hit by wider market sell-offs on Tuesday. The Nasdaq Composite was the loser among major averages, falling more than 2.6% as investors switched from high-growth areas of the market.
The Invesco Solar Fund gained 233% in 2020, significantly outperforming the 16% growth of the S&P 500. For 2021, the fund is down 25% while the S&P 500 is up 10%.
– CNBC’s Michael Bloom contributed to the coverage.
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