With the 2024 U.S. presidential election approaching, the potential impact on solar stocks has become a major concern for investors, according to RBC Capital.
Analysts at the bank provided a detailed analysis, suggesting that the current environment could provide a buying opportunity, particularly for select names with less exposure to the Inflation Reduction Act (IRA) or those that could benefit from protectionist policies under a Republican administration.
Clean energy stocks have underperformed year-to-date, with the iShares Global Clean Energy ETF (NYSE: ICLN) down about 13%, missing expectations by about 29%. RBC notes that the decline intensified after the presidential debate, which saw a surge in Republican support.
The bank says the prospect of a Republican victory has raised concerns about the future of the individual retirement law, though its analysts believe a full repeal of the law is unlikely due to partisan support for job-creating benefits in non-Democratic districts. However, uncertainty over a possible partial repeal of the law remains a concern.
RBC argues that domestic manufacturers like First Solar (NASDAQ:) could benefit from increased protectionism. In contrast, they note that companies that rely on foreign imports, like Enphase (ENPH), Shoals (SHLS), and SolarEdge (NASDAQ:), could face challenges due to higher input costs from tariffs. The Biden administration’s approach has favored incentives over tariffs, benefiting companies that rely on cheaper imports.
While a Republican administration could lead to headwinds and increased volatility, RBC sees strong state-level support driven by renewable energy requirements.