Solar stocks jumped on Thursday on what appears to be overly enthusiastic speculation. SunPower Corporation (NASDAQ:SPWR) soared more than 13% higher. Canadian Solar Inc. (NASDAQ:CSIQ) climbed more than 7% higher. JinkoSolar Holding Co., Ltd. (NYSE:JKS) popped 4.4% higher. First Solar, Inc. (NASDAQ:FSLR) posted the smallest move in the group, and even then, it was up 3.2%.
Those gains have continued in early Friday trading. SPWR is up another 8%, CSIQ is up another 5%, JKS is up 3%, and FSLR stock is up 5%.
The spark? Late Wednesday night, President Donald Trump mentioned at a campaign rally in Cedar Rapids, Iowa that he was “thinking” of a solar wall. Why? Well, if the wall doubled as a solar plant, it could “pay for itself” (Trump’s words).
So FSLR stock and other solar stocks jumped. One, because the construction of a solar wall would require solar energy resources. Two, because it signals that Trump may not be entirely against the solar energy sector.
These solar stocks have added millions of dollars in value … all because Trump mentioned he was thinking about building a solar wall at a rally in Iowa.
That is a head-scratcher. The dots don’t connect. Valuation doesn’t match reality.
A Solar Wall Is a Far-Fetched Idea
Solar stocks are acting like the solar wall is a done deal. But here’s the thing: The construction of a wall between Mexico and the U.S. is far from a done deal.
A solar wall? Even less likely.
While Trump is working to fulfill his campaign promises, many of them have gone unaddressed or blocked by other arms of the government. On his fifth day in office, Trump ordered for construction of the wall to begin. But as of last month, Customs and Border Protection (CBP) had just $20 million to start building the wall.
That isn’t much. The wall is estimated to cost between $1 and $22 million per mile. The border between the U.S. and Mexico is more than 1,900 miles. So the $20 million on hand right now could build, at best, about 1% of the wall.
Clearly, funding is needed. But where is it going to come from?
Trump continues to say Mexico will pay for the wall, but Mexican President Enrique Peña Nieto has reiterated multiple times that his country will not pay for it. That means Americans are going to have to pick up the tab, and that will be a tough hurdle for Trump to overcome.
Moreover, past precedent doesn’t really support “build the wall” enthusiasts.
Much like they are today, many Americans in 2006 were worried about how secure the U.S.-Mexican border was. In response, President George W. Bush launched SBINet, or the Southern Border Initiative Network.
SBINet was basically version 1.0 of Trump’s wall. It was supposed to be this virtual fence of sorts that leveraged cameras, sensors, and other technology to make the border more secure.
But SBINet failed after 4 years and $1 billion. Trump’s wall looks doomed for a similar fate.
Also, it is important to note that while a solar wall may be energy-efficient, it isn’t environmentally friendly. Research suggests that such a wall could have dramatic destabilizing effects on the surrounding wildlife.
It’s likely the case, then, that multiple wildlife protection groups protest the construction of the wall — yet another obstacle Trump has to circumnavigate.
Bottom Line on Solar Stocks
The solar wall is most likely not going to happen. And yet, here we are, with FSLR stock and other plays in the space up double digits in just a pair of days.
Those gains have had essentially one major catalyst: a Trump comment at an Iowa rally.
Solar stocks are out over their skis here. It’s a good time to fade the rally.
As of this writing, Luke Lango did not hold any positions in the aforementioned securities.
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