Exchange traded funds that invest in global solar energy stocks were among the top percentage gainers Friday as the volatile ETFs rose on optimism surrounding the deal for SunPower.
French energy giant Total (TOTF.PA) said it will purchase up to 60% of SunPower (NasdaqGS: SPWRA) (NasdaqGS: SPWRB) for about $1.4 billion.
SunPower is as a top holding in Guggenheim Solar ETF (NYSEArca: TAN) and Market Vectors Solar Energy ETF (NSYEArca: KWT). Both ETFs rallied more than 3% in morning trade.
"Given its extremely narrow focus, this thematic fund should be treated as a satellite specialty holding to complement a diversified portfolio, albeit one that may be held for several consecutive years," said Morningstar's Abraham Bailin in a recent analyst report on Guggenheim Solar ETF.
"Several other alternative energy options, such as wind or geothermal, may prove more cost-effective than solar. Nuclear development is also on the table," according to the report. "As electricity prices fall in tandem with natural gas prices, alternative energy projects become less economical."
The SunPower deal fired up investor enthusiasm for solar energy and the sector ETFs rose sharply.
The offer at a big premium "is a validation for the solar sector and confirms the notion that valuations are compelling," Jefferies analysts said in a note.