Solar stocks in the U.S. saw a sharp rally on Apr 4, following a Washington Post article which claimed that President Trump’s administration is planning to impose a carbon tax. If approved, this tax will help the government make up for the revenue loss expected from the corporate tax cut proposed by Trump.
However, this tax imposition will clearly contradict Trump’s pledge to end America’s “war on coal”. In fact, from the very first day of his tenure, Trump has been acting against the former government’s Clean Power Plan and is determined to revive the coal industry.
What’s a Carbon Tax?
A carbon tax would deter energy corporations from releasing carbon dioxide and other greenhouses gas emissions through the burning of gasoline, coal and other fossil fuels. Many Democrats have supported the carbon tax as a way to address climate change. In 2013, the nonpartisan Congressional Budget Office projected that a modest tax of $20 per ton of carbon dioxide emissions would raise roughly $1.2 trillion over a decade.
However, many congressional Republicans have opposed this idea saying that such a fine might devastate the economy through the reduction in job and hike in energy costs. Such a tax will also affect coal producers like CONSOL Energy Inc. CNX.
How Did the White House React?
Only a few hours following this release, White House officials denied any knowledge of it, claiming that no such carbon tax plans are presently under consideration.
As per Reuters, this is the second time that the Trump administration has shot down the chances of a carbon tax. On Feb 8, officials met with a group of Republicans who called for a $40 per ton tax on carbon emissions to deal with global climate change. However, as expected, many Republicans opposed it vehemently.
Will Solar Stocks Benefit?
Setting aside all controversies, if a carbon tax is imposed, companies in the alternative energy space will directly benefit from it. As per U.S. Energy Information Administration (EIA), solar power is expected to be the fastest growing renewable energy source in the forecast period, with total utility-scale capacity increasing 44% from the end of 2016 to 31 GW at the end of 2018. Naturally, the imposition of carbon tax will compel energy companies to shift to solar more rapidly.
Stocks to Pick
Here are three solar stocks that have seen a decent price hike following the article on carbon tax possibilities.
Vivint Solar, Inc. VSLR is a provider of residential solar energy systems in the U.S. Its share price witnessed a 3.4% rally following the news. Going forward, this Zacks Rank #2 (Buy) stock boasts a solid long-term earnings growth expectation of 13.9%, higher than the industry level of 4%.
Enphase Energy, Inc. ENPH delivers microinverter technology for the solar industry, which increases productivity and reliability of solar modules. It has a Zacks Rank #3 (Hold) and witnessed a 2.2% rise on Apr 4. The company’s current year loss estimate has narrowed down 24.4% in last 60 days.You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
First Solar, Inc. FSLR manufactures solar modules with an advanced thin film semiconductor process that significantly lowers solar electricity costs. Its share price witnessed a 1.9% hike yesterday. This Zacks Rank #3 company’s average earnings surprise for the trailing four quarters is pegged at 59.27%.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CONSOL Energy Inc. (CNX): Free Stock Analysis Report
First Solar, Inc. (FSLR): Free Stock Analysis Report
Vivint Solar, Inc. (VSLR): Free Stock Analysis Report
Enphase Energy, Inc. (ENPH): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research