As the 2024 U.S. presidential election approaches, the potential impact on solar stocks is becoming a key concern for investors, according to RBC Capital.
Analysts at the bank provided a detailed analysis, suggesting that the current environment might offer a buying opportunity, especially for select names less exposed to the Inflation Reduction Act (IRA) or those that could benefit from protectionist policies under a Republican administration.
Year-to-date, clean energy stocks have underperformed, with the iShares Global Clean Energy ETF (NYSE:XLE) (ICLN) down approximately 13%, underperforming the S&P 500 by 29%. RBC notes that this downturn intensified following the presidential debate, which saw a surge in Republican support.
The bank says that the prospect of a Republican victory has raised concerns about the future of the IRA, though its analysts believe a full repeal is unlikely due to bipartisan support for job-creating benefits in non-Democratic districts. Nonetheless, the uncertainty around potential partial repeals remains a concern.
RBC highlights that domestic manufacturers like First Solar (NASDAQ:FSLR) might benefit from increased protectionist policies. In contrast, they note that companies dependent on foreign imports, such as Enphase (ENPH), Shoals (SHLS), and SolarEdge (NASDAQ:SEDG), could face challenges due to higher input costs from tariffs. The Biden administration's approach has favored incentives over tariffs, benefiting companies reliant on cheaper imports.
While a Republican administration might introduce headwinds and increased volatility, RBC sees robust state-level support driven by renewable energy requirements.