This is about stock market craziness, not about solar power.
By Wolf Richter for WOLF STREET.
This is about stock prices that get inflated beyond recognition on nothing but wild mania, and when the mania subsides, the stocks collapse and are inducted into our pantheon of Imploded Stocks. And we’re going to look at eight of these imploded solar stocks.
This is not about solar power. Rooftop and utility-scale solar installations are now a fairly large business. Utility-scale batteries have become a profitable way of arbitraging the highly volatile electricity spot prices that can spike during high-demand hours and plunge during low-demand hours, and in this arbitrage, batteries work well with big solar installations, buying electricity when the price is low, and selling when it’s high. And they work well with small-scale solar too. Some of the eight companies here are involved with both solar power and energy storage.
There are up-front costs with solar power, as there are with every power plant. But with solar, the “fuel” is free for the life of the installation, and the math has been getting better as the price of photovoltaic panels has come down over the years. In 2023, the share of electricity generated by small-scale and utility-scale solar installations rose to 5.6% of the total electricity generated in the US.
The eight companies here are sort of pure-plays in the solar-power field. Big utilities are all over solar power, as are big equipment providers, and of course, Tesla. But these eight companies here are specialized players, many of them with over 1,000 employees at the peak, and with hundreds of millions to several billion in annual revenues.
Globally, about 85% of the photovoltaic panels are manufactured in China, which is also its own biggest customer. Vietnam is #2 with a share of a little over 3%. There are some efforts underway to boost manufacturing of photovoltaic panels in the US, to not be so totally dependent on China. But that will take a while to pan out.
This is about stock market craziness, not about solar power.
SunPower has been around for a long time. It went public in 2005 as a spin-off from Cypress Semiconductor. It was one of the big boys at the time.
Its stock experienced two huge bubbles. The first in 2006-2007 when it went from $20 a share to $100. The second started in May 2020, when free money turned brains to mush, and the stock multiplied by 12, from $4 a share to $54 a share in about 18 months to peak in January 2021. Then it collapsed.
There was a mix of operational issues, years of substantial losses, accounting issues, missed filing deadlines, defaults, etc., etc. When it could no longer raise new cash to burn, after it had already burned everything it had, it was over.
In August 2024, SunPower filed for bankruptcy. Most of its assets were acquired by solar SPAC Complete Solaria for $45 million (more in a moment), and SunPower’s shares and investors got wiped out.
This stuff happens. What was crazy were the two spikes in share prices on nothing but mass-mania, and after it subsided, the stock collapsed to zero (data via YCharts).
Complete Solaria [CSLR], the residential solar systems provider that acquired SunPower’s assets for $45 million, had gone public via merger with a SPAC in July 2023, an amazing feat, given that the ignominious SPAC bubble had already collapsed. From the merger-share price of $10 a share, the stock has plunged by 81% to about $1.90 currently, including a slick rug-pull right after the SPAC merger was completed (data via YCharts).
SolarEdge Technologies [SEDG] makes inverters, batteries, power optimizers, and other equipment for solar systems. Back in 2015, when it went public via IPO, SolarEdge made a deal with Tesla Energy to provide inverters for Tesla’s Powerwall. But eventually, Tesla produced its own inverter.
The company, which is headquartered in Israel and is largely active in Europe, made several acquisitions: In 2018, it acquired a major stake in South Korean maker of battery cells and batteries, Kokam. In 2019, it acquired a majority stake in Italian EV powertrain manufacturer SMRE, and it acquired UPS maker Gamatronic. In 2023, it acquired UK-based software-as-a-service provider Hark Systems.
In prior years, the company booked some net income, but over the past five quarters, it booked massive losses, totaling $1.72 billion, including $1.2 billion in Q3. And sales collapsed in 2024, including by 65% in Q3 2024.
The stock price had multiplied by 10 between early 2019 ($36 a share) and January 2021 ($360 a share), then plunged and spiked a few more times within the same range, before the big kathoomph in the second half of 2023. The stock has now plunged by 96% from the triple peaks in 2021 and 2022:
Sunrun [RUN] makes and installs residential solar systems that it sells as a subscription or financed purchase. The company, which is based in San Francisco, went public via IPO in 2015. There had been some profitable years, but over the past five quarters, it lost $1.45 billion.
The stock had multiplied by 11 between April 2020 ($8.36) and January 2021 ($96.50), but then collapsed and today, closing at $9.23, is down by 91% from that peak.
Enphase Energy [ENPH], makes equipment for residential and business solar and storage systems, and EV chargers. After the California-based company had gone public via IPO in 2012, its stock wobbled along the single-digit-dollar line for years. But then in 2019, it took off and multiplied by 48, to $336.00 in December 2022, before collapsing. Today, it’s down by 81% from that high.
The company has been mildly profitable. But revenues declined since 2023, including a 31% year-over-year plunge in Q3 2024.
Shoals Technologies [SHLS], which makes assorted equipment for solar systems, including utility-scale systems, went public via IPO in January 2021 at $25 a share. A month later, it was at $40.17, which was also the peak. Since then, shares have plunged 89% to $4.67 today.
The company had been mildly profitable in recent years, but revenues plunged 30% in Q3, and it booked a loss.
Sunnova [NOVA], which sells solar energy equipment and services, went public in July 2019 at $12 a share, and the stock traded largely around $10 until the covid money came along, when it multiplied by 5 from March 2020 till February 2021.
Just around the peak in February 2021, and still flying high, the Texas-based company acquired SunStreet, a residential solar platform, from homebuilder Lennar, and as part of the deal became the exclusive residential solar and storage provider for Lennar’s new developments.
Since that peak in February 2021, the stock has collapsed by 94% to $3.13. The company has consistently lost large amounts of money, including $418 million in 2023 and $225 million in the first three quarters of 2024. Lennar probably knew why it dumped SunStreet.
Array Technologies [ARRY], which manufactures ground-mounting systems for solar installations, went public via IPO in October 2020, at $22 a share. The stock popped out the gate and quickly rose to over $40 a share, peaking at $51.01 in January 2021, four months after the IPO.
The IPO was notable for two reasons: One, it raised over $1 billion amid huge demand for the shares; and two, it was the beginning of the exit for PE firm Oaktree Capital, which had backed Array.
The company had some mildly profitable years. Sales grew through 2022 but began to decline in 2023. In recent quarters, sales plunged, including by 34% in Q3 2024, generating a large loss.
The stock has now plunged by 86% from the January 2021 high, to $6.97.
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Solar can make sense. But a lot of installations would not have happened without government subsidies (not arguing if these subsidies are good or bad, just stating a fact).
I can tell from my install here in MA: tax rebates + state subsidy paid for 30% of installation cost, which came out to $8k in subsidies. Another big subsidy is net-metering because it acts as if building/maintaining/load balancing the network is absolutely free. In comparison in Germany where cost of inbound electricity is ~40ct/kWh, you typically only get 8ct for outbound solar (even those 8ct are still subsidized, it just got a lot less over the years). About half of my yearly 6MWh production gets buffered through the network, so taking the above 20% as an approximation of ‘worth of outbound excess solar energy’, that’s an 80% subsidy of 3MWh worth of electricity or another ~$800 subsidy per year. Cost of government subsidies over the amortization time of the system (10y) is thus $16k on a system that cost $24k.
So apart from the hype cycle having naturally ebbed, if the government decides to cut down on subsidies and increases installation costs through tariffs, a lot less new installations will make sense. Most likely cost/benefit will only look good in high sunshine / high electricity cost areas.
Re net metering: just remember for inbound electricity you pay for generation and transmission, whereas for outbound electricity you’re only credited for generation.
That must be how we ‘pay’ for load balancing.
Here in MA, we get full per kWh cost (incl transmission charges) credited for energy going into the system though. So these costs are paid by net positive electricity users, not by solar system owners who keep a net-zero balance over the year. The only charge that is not included in the compensation for outgoing energy is a flat monthly customer charge of 7$.
In any case, those transmission charges are only part of the true cost. The further north you get, the less will demand peaks correlate with solar production. Right now my system produces nothing (because the panels are covered by snow) while the heat pump is working near full capacity. The cost of providing backup gas power plants for such situations is quite high, but not included in the transmission charges. It will just increase overall generation price level. Not that it really matters in which item exactly it appears on the bills, it’s a transfer payment, paid for by other electricity consumers as mandated by state law. The Germany example provides better insight into the true worth of excess solar in an area where you have anti-correlated solar production and demand peaks, and the government decided to mostly remove transfer subsidies.
The situation will be different in a place like Arizona where solar production and demand peaks (AC) correlate well and thus solar actually reduces the need for backup power plants.
True but solar subsidies are hardly the only place where massive government energy subsidies exist. And as you mentioned nothing wrong with subsidies and other policies in general except if they interfere in the development of other areas that could compete if given some runway.
Actually, it kinda is.
Solar is still more lifecycle expensive, power density/efficiency is abysmal (think lots of land needed) and still requires massive government support to remain as option.
It has it niches and, in many of them, is the clear winner. Niches don’t make much of a market.
“This is not about solar power.”
Right, if it’s not about solar then which solar company stocks are doing well?
RTGDFA. Your anti-solar BS is clogging up your mind and blinding your eyes. These stocks were priced about right at $8 share or at $5 a share or at $10 a share or maybe over priced at $20, years ago, no problem, and most of them made a little money, and revenues grew, and fine. But then shares multiplied by 10 or 40 or whatever in just a couple of years, without much changing, other than the stock market mania, and that is the problem, and now those shares collapsed, and this mania and its collapse is the topic of this article.
Respect. And I concur.
Thanks for another good article Wolf.
The insanity of these previous valuation is mind boggling.
With “the tech companies” there is at least room to spin a pile of BS about exponential growth market capture etc… I don’t know how these companies managed to spin their share price to the moon in the boring market of electricity supply.
Here in Australia solar has been around for a very long time. I’ve never crunched the numbers myself but it has long made economic sense even without subsides. (evidence by corporate & industrial take-up) With subsidies can be a no-brainer.
However in some places here the market is reaching saturation. Nobody wants to buy power at noon in summer. However at night or in winter then there is demand that needs to be met.
No surprise that income from solar is dropping off a cliff during the middle of the day. And somebody still needs to fill the gap when the sun isn’t shining.
Those are some pretty spectacular charts. It does seem like increasing interest rates from basically 0% in ~2022 is steadily letting the air out of at least some of all these overinflated tires we have around here. I guess we should just be patient for all the different pots of malignant money to finish draining out.
One of my old friends worked at a fairly dysfunctional solar company (I already forgot which it was). The charts here and his anecdotes more or less match up. Fortunately, somewhere in 2023 or 2024 my friend moved on to a better company, and seems to be doing better. Maybe he bought puts?
I think I’m trying to say that the stock prices tell incredible stories on their own, but there’s also the personal cost to the little droplets of human glue holding these incredible messes together. Not much thought given to the glue after the building catches fire, I suppose.
I’m still looking forward to one day having our own solar & battery setup. But for our use case, we’d like the technologies to mature some more, and for our bank account to mature more too. Until then, the generator will be there for us next time old man winter breaks a power line or a careless driver shears a utility pole in half in the middle of the night (I still can’t believe it either)
Looks a lot like a long pump and dump. There was/is no rational reason for those valuations. Most of those stocks had collapsed before California NEM3, so that can’t be it.
Line clearance, with 200 ft. trees, is a delusion during high wind events.
Let’s put solar in perspective in terms of the energy mix:
https://wolfstreet.com/2024/02/27/u-s-electricity-generation-by-source-in-2023-natural-gas-coal-nuclear-wind-hydro-solar-geothermal-biomass-petroleum/
Did retail investors eat most of the losses or did some institutional investors get taken out behind the shed too? Curious if it was big names losing bigs bucks or just lots of little guys?
Are there any examples of solar companies that have gone through a 5-10x multiple expansion like this and held on to it? I’d say SEDG platuea’d for a couple years before the plunge, but I am curious if there is a more successful example?
First Solar and Nextracker are on my watchlist, but I likely won’t nibble until/if their stock prices fall another 80% and 50%, respectively.
Wolf, if you do another industry specific, stock market craziness article, please consider the beer/booze/wine industry. I would like to see your thoughts on the selloff there. Like solar, seems to still have a long way to go since the price/sales ratio got so high.
Thx,
Shocka
The plunge in wine consumption, after the boom during the pandemic, is quite something. A big issue here in California Wine Country. The industry is reeling. No one knows what to do with all this wine. Beer consumption has been dropping for years, so the industry is used to it. What may be new is the drop of craft beers. I have to collect some data on this stuff.
Seems like the craft beer industry got oversaturated with breweries while the number of enthusiasts inevitably plateaued. But there may be more to it than that.
Shocka Locka,
Had some neighbors who owned a winery in central valley and they put a lot of energy into China. Tariffs however on those made other foreign brands more competitive and less expensive. Obviously down turn hurt because people would go out and buy glasses of wine instead of a bottle and they would say the first two glasses pay for the wine, the rest is profit.
Excellent article Wolf. What it truly illustrates to me is the downfall of the Biden administration. Most of the action begins in 2021 and ends in 2024. Now I’m not a fan of either solar or President Biden so make of it as you want.
Politics are forbidden I know. But I was offered the option of installing the panels on my roof, along with all the subsidies. Which I could not find to be advantageous.
“Most of the action begins in 2021 and ends in 2024.”
No, most of the “action” begins in early 2020 through early 2021 with the ridiculous spike, and that was during Trump 1, and some of the spikes were turning south already by the time of Biden’s inauguration.
Trump got the spike, Biden got the plunge. The problem was the ridiculous spike during Trump. The plunge during Biden was the unavoidable consequence of the spike.
I have no idea how you can bring Biden into these stock price charts, especially in the wrong place.
and then investors all seemed to “rotate” into the mag7. their valuations are truly stupid.
Now that we’ve got the asset-pumper to end all asset-pumpers back in office, you ain’t seen nothin’ yet. Brace for unrelenting inflation.
Given the time-frame it seems pretty clear that these solar pump and dumps were induced by JPow’s nonsense pandemic money printing bacchanalia, nothing more nothing less.
It’s amazing how many other mini bubbles have already come and gone within the overarching mega everything bubble: crypto, metaverse, SPACs (which I had forgotten about), marijuana, now crypto again. Reminds me of Jeremy Grantham’s thoughts on the dot com bubble: how the junk went first and people held on to the larger companies as the “safe bets,” but then even all of those tumbled like 80%-90% over the next few years. Seems like we’re at that stage with the mag7 now.
Wolf, I believe you just called the bottom for solar. Congratulations, sir – excellent timing. 👌