Are meme stocks back? Is a short squeeze hitting solar and clean energy?
It seems all the possibilities are on the table on Monday as some of the more volatile companies in energy see their shares skyrocket on relatively little news. Solar energy stocks were some of the biggest beneficiaries today.
Shares of SunPower(NASDAQ: SPWR) led the way and popped as much as 25.2% early on Monday, while Sunnova(NYSE: NOVA) jumped as much as 13.2%, and Sunrun(NASDAQ: RUN) was up 10.1%. The three residential solar stocks were up 23%, 9.7%, and 7.2% respectively at noon ET.
Growth stocks are back in favor
For today, investors are piling back into some of the most popular stocks from 2021 after a popular Reddit personality returned to the platform. Sold stocks were among those that did well in that time, and other meme stocks are up big today as well.
As much as meme trading could be helping some stocks, it's also possible there's a bit of a short squeeze going on with each of these companies having a high percentage of its shares sold short.
SPWR Short Interest data by YCharts
The bullish trend for solar energy
It wasn't all speculation in the market today around solar energy stocks. Interest rates were down in the U.S., and that could help make solar projects more affordable.
The 10-year government bond yield fell 2 basis points to 4.48%, which doesn't seem like much, but the rate is up 101 basis points over the past year, so any movement lower is positive news.
Most solar projects are financed over decades and paid for with monthly payments that offset utility savings. That means even a small reduction in interest rates can make projects economically feasible or give installers better margins.
While the change in rates is small, it's a factor investors think about because these companies are so reliant on debt to finance their businesses long-term.
The truth in solar energy today
A lot is going into today's move from meme trading to short squeezes, but the reality is that solar stocks have been plummeting for over a year and investors are looking for some kind of bottom. Traders may have seen enough sentiment to push shares higher today.
But the fundamental problems facing these companies haven't changed. Financing projects is still difficult, and higher costs from labor and interest rates will continue to put pressure on the industry. There's been hope that higher utility rates will offset most of the increase in costs, but that takes time to work its way through the system, and in the meantime, most companies are seeing installations drop.
I don't think there's fundamentally anything different today about solar energy stocks, and that may be the problem. Companies are expecting demand to pick up in the second half of the year, but they all need to survive until then for it to matter.
For today, the boost in stock prices is nice, but it doesn't change the challenges facing residential solar stocks this year.
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Travis Hoium has positions in SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
