Is Tesla's Planned $2.9 Billion Purchase a Good Sign for These 3 Solar Energy Stocks?
Key Points
Tesla plans to increase its solar capacity to 100 GW by the end of 2028.
It will buy a lot of solar equipment from China to achieve that goal.
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Tesla (NASDAQ: TSLA) is reportedly in talks to purchase up to $2.9 billion in solar equipment from a group of Chinese suppliers. That big purchase would mark a major step toward Tesla's goal of deploying 100 GW of "solar manufacturing from raw materials on American soil before the end of 2028". It might initially seem odd for an electric vehicle (EV) maker to invest heavily in solar energy, but Tesla also produces its own solar panels and home batteries. Over the long term, it aims to evolve from an EV maker into a "full-stack" green energy company.
Three Chinese solar companies could benefit from Tesla's spending spree: Suzhou Maxwell Technologies, Shenzhen SC New Energy Technology, and Laplace Renewable Energy Technology. However, it can be tough for U.S. investors to buy these three stocks.
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Why is it tough to invest in these solar stocks?
Suzhou Maxwell, a leading producer of screen-printing equipment for solar cell manufacturing, and Shenzhen SC New Energy Technology, which develops crystalline silicon production equipment, both list their A-shares on the Shenzhen Stock Exchange. Laplace Renewable Energy, a provider of process equipment and solutions for photovoltaic cells, trades on China's STAR Market. None of these stocks is available as an ADR or OTC stock for U.S. investors.
Instead, the easiest way to gain exposure to these three stocks -- and other leading Chinese solar companies -- is to simply invest in a U.S.-listed exchange-traded fund (ETF) that holds them. For example, iShares Global Clean Energy ETF (NASDAQ: ICLN) holds Suzhou Maxwell, while other ETFs hold Shenzhen SC and Laplace Renewable. The other option is to use an international brokerage with access to the Shenzhen and STAR exchanges.
But will Tesla's big purchase drive these three stocks higher?
Tesla's $2.9 billion in orders -- even split across several suppliers -- would be a significant amount for Suzhou Maxwell, Shenzhen SC, and Laplace, which generated $1.4 billion, $2.7 billion, and $793 million in revenues in their latest fiscal years, respectively. It might also drive analysts to revise their downbeat estimates for these three companies -- which have all been struggling with a supply glut and a fierce pricing war across China's commoditized solar market.
|
Estimated Revenue Growth |
Current Fiscal Year |
Next Fiscal Year |
|---|---|---|
|
Suzhou Maxwell |
(4%) |
(2%) |
|
Shenzhen SC |
(13%) |
(44%) |
|
Laplace Renewable |
(8%) |
25% |
Data source: Marketscreener.
However, Chinese regulators would still need to approve those exports to Tesla -- and the tensions between the U.S. and China could easily kill a potential deal. So while Tesla's orders might breathe fresh life into these Chinese solar stocks, I wouldn't rush to buy them right now.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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