It’s fair to say that renewable energy stocks are among 2021’s biggest disappointments. At the industry level, solar equities are, unfortunately, part of that conversation.
The Invesco Solar ETF (TAN), the original and dominant solar exchange traded fund, is saddled with a year-to-date loss, but investors should be careful of selling low with TAN. That could turn a temporary loss into a permanent mistake, particularly if the industry rebounds in 2022 as some analysts believe will happen.
“The sentiment around the Sustainability sector continues to be positive in the mid to long term despite near-term pressure on the stocks, with investors leaning into the secular shift that is occurring not just in sustainable energy and mobility technologies, but in the intersection of these two markets,” said Cowen analysts in a note to clients last week.
Indeed, TAN and its components dealt with an array of hurdles this year, including soaring commodities prices, supply chain woes, and disappointments on the federal spending front. However, the long-term outlook for TAN member firms remains compelling in the eyes of some market observers.
“We believe the macro growth opportunities are compelling over the medium and long term as the global transition to cleaner energy and technologies accelerates,” according to B. Riley.
Much of the near-term duress TAN is enduring is attributable to the failure of President Biden’s Build Back Better legislation, which included a massive amount of spending for renewable energy.
“The bill included more than $500 billion for green projects, making it the single largest climate investment initiative in U.S. history. Provisions included tax credit extensions for renewable energy sources, a stand-alone energy storage credit and funding for nuclear and green hydrogen,” reports Pippa Stevens for CNBC.
Some analysts argue that investors were too hasty in departing solar equities when it became evident that Build Back Better is on ice until next year. While the current environment isn’t sanguine for renewable energy stocks, that could rapidly improve, particularly as weak hands depart. That could pave the way for better things for TAN in 2022.
“Despite these headwinds, Wall Street analysts still see upside. Morgan Stanley said investors should focus on key long-term drivers for the industry. The firm pointed to growing customer and investor interest in clean energy, barriers to entry new companies looking to break into the space, as well as grid instability and rising power costs pushing consumers to distributed generation,” according to CNBC.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.