Markets

Why Solar Stocks Kept Climbing Tuesday

What happened

Investor enthusiasm for the merger between Sunrun (NASDAQ: RUN) and Vivint Solar (NYSE: VSLR) continued unabated on Tuesday. In fact, it seems investors are so enthused that their enthusiasm may have overcome some rather negative news for one of these companies' solar power rivals, SunPower Corporation (NASDAQ: SPWR).

All three of these stocks ran up on Tuesday, with Vivint shares gaining 13.5%, Sunrun rising 12.3%, and SunPower gaining an even 10%.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

It's that last result that's most surprising. You see, just this morning, SunPower got itself downgraded by analysts at Spin-Off Research (SOR). According to SOR, SunPower stock that currently costs nearly $10 a share is actually worth only about $7. In the analysts' opinion, that makes SunPower stock a "sell," reports TheFly.com today. So ... why is SunPower rising?

SunPower manufactures solar panels, and also provides solar energy "services," including construction of everything from solar systems for installation on rooftops to the construction of entire solar energy plants. In this latter capacity, the company is therefore a sometime competitor to both Sunrun and Vivint, and a logical loser to a deal that combines two of its biggest foes into a market giant.

And yet, the mere fact of combining two competitors into one may result in lessened competition in this market, benefiting even smaller competitors like SunPower.

Now what

At the same time, SunPower is currently in the process of splitting itself into two companies: Maxeon, which will inherit the company's manufacturing operations, and SunPower, which will continue providing solar "services." Theoretically at least, such a split-up could make SunPower's (which is to say, Maxeon's) solar panels more attractive to companies that would no longer be competing with it after the spinoff.

Additionally, as my fellow Fool and solar specialist Travis Hoium suggested last week, it's possible that with the way things are evolving in the solar industry, even SunPower itself might not compete directly with a combined Sunrun-and-Vivint going forward, preferring to "assume the role of the service and technology partner for local and regional installers" instead.

In such a case, this merger might not be bad news for SunPower at all. In such a case ... all three stocks may actually deserve to have gone up today.

10 stocks we like better than SunPower
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and SunPower wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 2, 2020

 

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SPWR RUN

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More