7 Undervalued Solar Stocks Worth Watching in 2024

NextEra Energy Partners is a publicly traded limited partnership - a YieldCo structure - that acquires, owns, and manages clean energy projects on behalf of its parent, NextEra Energy (NYSE: NEE), which operates the largest solar portfolio in the United States. The LP structure is designed to return cash to investors through distributions, funded by the long-term contracted revenues from wind and solar assets. This makes it a hybrid between a fixed income investment and an equity growth vehicle, with the distribution yield being the primary income driver.

The strategic context here is important. In Q2 2024, NextEra Energy Resources - the parent's development arm - added over 3,000 MW of new renewable energy projects to its backlog, bringing the total to approximately 22.6 GW. Of particular note, 860 MW of new additions came from agreements with Google to supply power for its data centre operations - a direct example of the AI-driven power demand narrative playing out in contracted revenue. NextEra Energy Partners' cash available for distribution (CAFD) reached $220 million in Q2 2024, up from $200 million a year prior, and its quarterly distribution was increased 1.4% to $0.905 per share, supporting the income thesis.

The primary risk is the YieldCo structure itself. NEP relies on accessing capital markets to fund new acquisitions and to refinance existing debt. The 2022–2024 rate environment proved hostile to this model, as higher borrowing costs compressed the gap between the distribution yield and the cost of capital, forcing management to slow distribution growth targets. Investors considering NEP are implicitly taking a view on the rate trajectory as much as on the solar build-out.

Eversource is the dominant regulated utility across New England, serving over four million customers across Connecticut, Massachusetts, and New Hampshire through its electric, gas, and water subsidiaries. Its inclusion on this list reflects its strategic positioning within a region that has ambitious clean energy mandates and that serves as a natural gateway for offshore wind and community solar development.

In July 2024, Eversource completed the commissioning of Enfield Solar One - a community solar project in Connecticut that stands as the largest community solar project in the state. Operating through the Connecticut Statewide Shared Clean Energy Facility Programme, it provides renewable electricity to over 700 residential and commercial customers. This is not a transformational project in financial terms, but it illustrates the direction of Eversource's evolution as a utility - from traditional fossil fuel distribution toward clean energy facilitation and ownership.

As a regulated utility, Eversource generates highly predictable, rate-case-driven earnings, which is both a feature and a limitation. The predictability reduces downside risk but also caps upside. The opportunity here is valuation: at 14.7× forward earnings with analyst consensus Buy ratings and an average price target of $73.26, the stock offers a moderate return profile with lower volatility than pure-play solar names. Zimmer Partners, a prominent hedge fund, held the largest disclosed position at $303 million as of June 30, 2024.

Pacific Gas and Electric is the largest investor-owned utility in the United States by customer count, serving approximately 16 million people across Northern and Central California. Its inclusion in a solar analysis reflects California's position as the world's fifth-largest economy and the most aggressive solar deployment market in the US - the state has among the highest per-capita solar penetration globally, and PG&E is the primary grid operator through which that electricity flows and is distributed.

The PCG investment thesis in 2024 is primarily a recovery story. The company emerged from a landmark bankruptcy in 2020 - triggered by catastrophic wildfire liabilities in 2017 and 2018 - and has since been rebuilding its balance sheet, regulatory relationships, and operational infrastructure. Crucially, post-bankruptcy PCG operates under an enhanced regulatory framework that allows it to recover wildfire mitigation costs through rates, reducing the existential tail risk that defined the 2018–2020 period. As California continues to mandate an aggressive transition to renewable energy - including mandated clean energy procurement targets - PG&E sits at the centre of that transition as the distribution monopoly through which solar power must flow to reach consumers.

The valuation reflects the recovery narrative rather than transformational growth: PCG is cheap relative to utility peers because the market continues to apply a discount for the residual wildfire liability and operational execution risk. For investors who accept that the worst is behind the company, this discount represents a potential opportunity.

Nextracker is the global leader in solar tracking systems - the mechanical and software infrastructure that allows solar panels to follow the sun's path throughout the day, increasing energy yield by 20–30% compared to fixed-tilt installations. The company's flagship NX Horizon product is the industry standard for utility-scale solar projects, and its TrueCapture software layer - a self-adjusting tracker control system - provides an intelligent optimisation layer that further improves output beyond what static tracker algorithms achieve.

The financial performance through the first half of 2024 validated the premium that the market historically assigned to NXT. Revenue growth has been strong, driven by the utility-scale solar build-out in the US, Europe, and Latin America. The company benefits from the IRA's domestic content incentives, which favour US-manufactured tracker systems and give Nextracker an advantage over Chinese-made alternatives. Its backlog provides significant revenue visibility beyond the current quarter, reducing the execution risk that affects more cyclically exposed manufacturers.

Nextracker's position in the value chain is strategically sound: every utility-scale solar farm - regardless of who manufactures the panels - needs trackers. This makes NXT a somewhat panel-agnostic way to play utility-scale solar deployment. The stock is not the cheapest on this list, but it offers arguably the best combination of market leadership, revenue visibility, and a direct operational link to the acceleration of large-scale solar deployment that AI data centre power demand is driving.

Array Technologies is Nextracker's primary competitor in the solar tracking market. Founded in 1989 and based in Albuquerque, New Mexico, Array was one of the pioneers of utility-scale solar tracker design and commercialised the category long before it reached its current scale. Its flagship DuraTrack system uses a proprietary linked-row architecture that requires fewer motors and controllers per megawatt than competing designs - a cost and reliability advantage that resonates with large EPC contractors managing thin construction margins.

Array's strategic differentiation from Nextracker lies in its expanded technology portfolio. Where Nextracker focuses primarily on single-axis trackers, Array has developed dual-axis tracking capability, which delivers higher energy yield in certain applications and geographies. Its 2022 acquisition of STI Norland, a Spanish tracker company, significantly expanded its European and Latin American presence, providing geographic diversification at a time when the European energy security crisis was accelerating solar deployment timelines across the continent.

The valuation argument for ARRY is compelling. At roughly 12× forward earnings versus Nextracker's ~16×, Array trades at a meaningful discount despite operating in the same end market and serving broadly the same customer base. This discount partially reflects Nextracker's superior software layer and its greater scale in the US market, but it also reflects the market's tendency to apply a lower multiple to the number-two player in a duopoly. For investors willing to accept a slightly more value-oriented entry point, ARRY offers substantive exposure to the utility-scale solar tracker market at a lower price.

First Solar is the only US-based solar module manufacturer of meaningful scale - a distinction that has become enormously important in the post-IRA policy environment. While the global solar module market is dominated by Chinese manufacturers, First Solar's domestically-produced cadmium telluride (CdTe) thin-film modules are exempt from the tariffs and trade restrictions that affect Chinese-made silicon modules, and they qualify fully for IRA domestic content bonuses that Chinese-manufactured panels cannot access.

This policy positioning translates into a concrete commercial advantage. First Solar entered 2024 with a backlog of approximately 80 GW of contracted future module sales - one of the clearest expressions of long-term revenue visibility in the entire solar industry. Its earnings per share were expected to reach approximately $13.57 in 2024, up from $7.74 in 2023 - a 75% year-over-year increase driven by the combination of capacity expansion, improving module pricing, and the realisation of IRA incentive benefits. Three new US manufacturing facilities are either operational or under construction, adding to a total nameplate capacity approaching 21 GW.

First Solar's technology is also structurally differentiated. CdTe thin-film modules perform better than silicon alternatives in high-heat and high-humidity conditions - characteristics common in the Sun Belt and in major emerging market solar markets. The lower carbon footprint of the manufacturing process (relative to crystalline silicon) increasingly matters to corporate buyers making sustainability commitments. These are durable advantages that are unlikely to erode simply through cost competition from Chinese manufacturers, which has been the primary threat to other Western solar companies.

Shoals Technologies occupies a niche that is less well-known to generalist investors but is absolutely fundamental to how utility-scale solar farms are built: electrical balance of system (EBOS) components. Every solar farm - regardless of who makes the panels, who supplies the trackers, or who built the inverters - needs EBOS components: wiring harnesses, junction boxes, connectors, combiners, and the electrical architecture that ties the individual panel strings together and routes power to the inverter. Shoals is the dominant US supplier in this category.

What makes Shoals' approach distinctive is its pre-assembled, plug-and-play architecture. Traditional EBOS installation involves extensive field wiring by electricians - labour-intensive, weather-dependent, and subject to quality variation. Shoals supplies pre-assembled units that arrive on site ready for rapid installation, dramatically reducing the skilled labour required and compressing project timelines. In an industry where skilled electrical labour is chronically short and project schedules are under constant pressure, this is a genuinely valuable proposition. The company's Solar BLA (Big Lead Assembly) system is an industry benchmark for large-scale utility solar projects in the US.

The compelling valuation case - forward P/E below 10× at September 2024 prices - reflects near-term headwinds rather than structural deterioration. The company managed through a wire insulation quality issue in 2023–2024 that required material remediation costs, creating a one-time overhang on margins and earnings. That issue is understood, addressed, and substantially resolved. The underlying order backlog remains solid, the competitive position is intact, and the market the company serves - utility-scale solar EBOS - is projected to grow at 15–20% CAGR through the end of the decade as both grid-scale solar and energy storage deployments accelerate. The June 2024 announcement of a $150 million share buyback programme signals management confidence in the longer-term outlook at current prices.