Is the 2025 solar energy industry investment window open? These leading stocks are worth paying attention to

2024 is a year of both ice and fire for the solar energy industry. While utility-scale photovoltaic installations continue to rise, the sector faces a cliff-like 32% decline in the residential solar market, high-interest rate pressures, and competitive shocks from China. TAN (Solar ETF) has fallen by as much as 37.62% throughout the year, with some leading companies facing bankruptcy risks, and market sentiment turning pessimistic at times.

Entering 2025, with the Federal Reserve’s rate cut cycle gradually beginning and the Inflation Reduction Act (IRA) policy support ongoing, the solar industry has a renewed opportunity for reassessment. So, is it time to consider positioning in this sector? Based on the fundamentals of several leading companies, the answer seems to be neither a simple “yes” nor “no.”

Why the Market Is Optimistic About the Long-Term Outlook of the Solar Industry

It is important to understand that the development of the solar industry exhibits clear cyclical characteristics. Historically, whenever energy crises erupt or climate policies are introduced, this sector tends to experience an investment boom.

Currently, the global energy transition remains on track. The U.S. Energy Information Administration (EIA) forecasts that the cumulative installed capacity of solar power in the U.S. will surpass 182 GW by 2026, with Texas leading the nation at an annual addition of 11.6 GW. This growth is driven by government tax incentives and corporate carbon reduction commitments.

From the perspective of the industry’s competitiveness, photovoltaic cell conversion efficiency has increased from less than 10% a decade ago to over 20%, while costs have fallen by 90%. In many regions, solar power has become the cheapest electricity source. This shift indicates that the industry has moved from policy subsidy-driven growth to economic viability, enhancing its resilience to risks.

Why U.S. Market Leaders Are Focusing Attention

First Solar’s “Structural Advantages”

First Solar (FSLR) has recently become a focus of Wall Street attention. Founded in 1999 in Arizona, this company specializes in thin-film photovoltaic technology, which performs better than traditional silicon-based modules in low-light and high-temperature environments.

The key factor is supply contracts. The company has secured long-term orders with multiple U.S. utilities, benefiting from IRA policy incentives and tariffs protecting imported photovoltaic products. These factors establish a relatively stable cash flow foundation for First Solar.

On the data side, 26 Wall Street analysts’ average 12-month target price is $210.12, representing a 26.31% upside from the current price of $166.35. The most optimistic forecast even reaches $275 (assuming a significant rate cut by the Federal Reserve triggers large project investments). Under a baseline scenario, if the company maintains a 5% revenue growth rate, earnings per share could stabilize at $8, supporting a reasonable valuation range of $175–$200.

Nextracker’s “Quarterly Outperformance”

Nextracker (NXT) is one of the hottest new stars in the solar industry. Its business model appears simple—providing smart tracking systems that automatically adjust the orientation of PV panels to maximize sunlight capture. However, its commercial value is severely underestimated.

After the May earnings report, the stock rose 12%, with founder Dan Shugar emphasizing that this is just the “foundation for sustained growth,” implying that momentum remains. 18 analysts’ average target price is $63.94, a 12.33% increase from the current $56.92. Key indicators include a strong balance sheet and ample free cash flow, which are especially valuable during industry-wide difficulties.

Enphase Energy’s “Pain Points and Opportunities”

Enphase Energy (ENPH) has a more complex story. As a leader in microinverters, it faces direct challenges due to over-reliance on Chinese battery supply chains (95% of lithium iron phosphate cells are sourced from China), which impacts tariffs. In the first half of 2025, gross margin pressure is expected to be severe—projected to decline by 200 basis points in Q2 and expand to 600–800 basis points in Q3.

But the key is timing. Enphase is actively diversifying its supply chain, with most batteries expected to come from non-Chinese sources by Q2 2026. 25 analysts’ average target price is $50.82, a 23.41% upside from the current $41.18. In other words, the market has already priced in short-term pain, with medium-term recovery potential being optimistic.

“Steady Players” in Taiwan’s Solar Industry

Delta Electronics: The Margin Defender

In 2024, Delta Electronics delivered impressive results: consolidated revenue of NT$421.1 billion (up 5% YoY), maintaining a high gross margin of 32.4%, with net profit after tax of NT$35.2 billion and EPS of NT$13.56. More importantly, return on equity (ROE) reached 16.4%, an excellent level in the electronics manufacturing sector.

Recently, Morgan Stanley raised its target price from NT$440 to NT$485, highlighting the company’s technological breakthroughs in AI data centers and 800V high-voltage DC power solutions. Analysts clearly state that as global demand for high-end power supplies continues to grow, Delta’s growth momentum is expected to extend into 2027.

While not a pure concept stock in the solar industry, it is one of the manufacturing companies most benefiting from the energy transition wave.

Chung Hsin Electric & Machinery: The Dark Horse Doubling Its Performance

In 2024, Chung Hsin Electric’s after-tax profit reached NT$3.623 billion, a 128% YoY increase, with EPS hitting a record high of NT$7.33. This is driven by the continued release of orders from Taiwan Power Company’s robust grid expansion plans.

In Q1 2025, revenue hit NT$6.448 billion, a new high for the same period, but due to an increased proportion of engineering projects, gross margin was under pressure, and EPS fell to NT$1.78. Six analysts have revised the median target price upward from NT$182.5 to NT$195.5, a 7.12% increase, indicating market confidence in its medium-term growth potential.

Risks Investors Should Be Aware Of

The solar industry is highly sensitive to policy changes. The future prospects of the IRA are uncertain, directly affecting long-term corporate investment decisions. Meanwhile, the continued expansion of Chinese photovoltaic capacity puts pressure on global margins, a competitive landscape that is difficult to change in the short term.

Additionally, 2024 has seen significant stock differentiation. SunPower plunged 70% and filed for bankruptcy, SolarEdge fell from $80 to below $20, while First Solar defied the trend and rose. This underscores the importance of stock-picking skills and the need to avoid blindly investing in the entire sector.

Interest rate environments are also an invisible threat. High rates suppress financing demand for residential solar, reducing overall industry demand. The Fed’s rate cut cycle offers a window of opportunity, but its size remains to be seen.

Conclusion

The solar industry is regaining market attention in 2025, but this is not a signal to go “all in.” Among leading companies, First Solar, Nextracker, and Enphase Energy each have their own bright spots, while Taiwanese stocks Delta Electronics and Chung Hsin Electric also demonstrate steady growth momentum.

The key is to select companies with long-term contract protections, resilient supply chains, or stable gross margins. Short-term policy risks remain, but medium-term growth opportunities are emerging. For investors, this is a window for careful stock selection and risk management, rather than a time for full-scale bets.