While investors’ hunger for SolarEdge‘s (NASDAQ: SEDG) stock was steady in October and November — during which the stock climbed 8% in each month — their appetites grew larger as 2020 winded down. According to data from S&P Global Market Intelligence, shares of SolarEdge bounded 15% higher in December, helping the stock to lock in a 236% gain for the year.
In addition to analysts espousing bullish outlooks on the stock, investors responded to the favorable treatment that the solar industry received in the stimulus bill.
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Keeping pace with the market through the first eight days of December, shares of SolarEdge rose 2.5% while the S&P 500 inched 2.2% higher. Then, the analysts’ actions came. On Dec. 9, Mark Strouse, an analyst at JPMorgan, boosted his price target to $315 from $239, according to Thefly.com, in addition to keeping an overweight rating on shares. The following day, Piper Sandler began coverage on SolarEdge, assigning a slightly more bullish $325 price target and overweight rating. Investors clearly took notice. After the two analysts’ ratings became public, shares of SolarEdge soared 17% higher while the S&P 500 rose only 2%.
An additional catalyst for the stock’s climb came in the form of the stimulus bill. Included in the sweeping legislation was a renewal of the investment tax credit (ITC) for solar power. Solar projects that begin construction in 2020 through 2022 are eligible for a 26% ITC; however, the ITC is reduced to 22% for projects that begin construction in 2023 and 10% for those that begin construction in 2024 and beyond.
Investors should be cautious about following analysts’ upgrades and price targets since they often have shorter investing timeframes than the long-term investing horizons that we favor. Nonetheless, SolarEdge’s movement in December may only be the beginning. The renewable energy sector appears to be flourishing, and SolarEdge may very well be a long-term winner as it holds a market leading position.
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Scott Levine has no position in any of the stocks mentioned. The Fintech Zoom recommends SolarEdge Technologies. The Fintech Zoom has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.