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 detailed analysis, suggesting that the current environment could provide a buying opportunity, especially for select names that are less exposed to the Inflation Reduction Act (IRA) or for companies that could benefit from protectionist policies under a Republican government.
Since the start of the year, clean energy stocks have underperformed, with the iShares Global Clean Energy ETF (NYSE:) (ICLN) down about 13% and down 29%. RBC notes that this downturn intensified after the presidential debate, during which Republican support rose sharply.
The bank says the prospect of a Republican victory has raised concerns about the future of the IRA, although analysts believe a full repeal is unlikely due to bipartisan support for job-creating benefits in non-Democratic districts. Nevertheless, the uncertainty surrounding possible partial withdrawals remains a concern.
RBC highlights that domestic manufacturers such as First Solar (NASDAQ:) could benefit from increased protectionist policies. In contrast, they note that companies that rely on foreign imports, such as Enphase (ENPH), Shoals (SHLS) and SolarEdge (NASDAQ:), could face challenges due to higher input costs due to tariffs. The Biden administration’s approach has favored incentives over tariffs, benefiting companies that rely on cheaper imports.
While a Republican administration could create headwinds and more volatility, RBC sees robust support at the state level, driven by demand for renewable energy.
