Solar Sell-Off Creates Buying Opportunity, Says Goldman Sachs (SCTY) (SUNE)

Goldman Sachs said the sell-ff in solar provides a buying opportunity. Stocks mentioned in the report include CL-Buy -rated SolarCity (NASDAQ: SCTY) and Buy-rated SunEdison (NYSE: SUNE). Neutral rated-TerraForm Power (NASDAQ: TERP) and SunPower (NASDAQ: SPWR), and Sell-Rated First Solar (NASDAQ: FSLR) were also mentioned.

"With US solar stocks down 25% on average in the past month (RUT -8%), we see an attractive setup into two near-term catalysts: (1) the Solar Power Int’l (SPI) starting next week, and (2) 3Q earnings. This is particularly true given our view that the group’s pullback has been driven by a combination of a selloff in crude and hedge fund de-risking, not by a downtick in fundamentals. While the latter remains a potential overhang for solar stocks given relatively high betas, we expect near-term data points to confirm fundamentals remain solid, particularly for US solar rooftop, and see stock action realigning with this dynamic into year-end," said analyst Brian Lee.

"Our US solar coverage has been highly correlated with the recent pullback in oil prices, despite this commodity having little impact on demand, ASPs, and potential returns for solar power assets. We note while backlog for US solars is 80%+ levered to N. America, only 1% of generation in the region is from oil, with even flat to lower natgas prices in recent years doing little to slow US solar demand, owing to rooftop, lower costs, and policy," he added.

For an analyst ratings summary and ratings history on SolarCity click here. For more ratings news on SolarCity click here.

Shares of SolarCity closed at $48.87 yesterday.

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