Renewable energy stocks went crazy this week as meme investing returned, short squeezes happened, and there was maybe some light at the end of the tunnel for some of these companies.
The biggest move was SunPower(NASDAQ: SPWR), which was up well over 100% early in the week, and as of noon ET on Friday is now up 43% for the week, according to data provided by S&P Global Market Intelligence. Direct competitor Sunnova Energy International(NYSE: NOVA) was also up as much as 23.6% and is now up 13.9% for the week.
Charging stocks were also beneficiaries, with Blink Charging(NASDAQ: BLNK) jumping as much as 23.8% and ChargePoint(NYSE: CHPT) up 24.2% at its peak. The two charging stocks are currently up 18.1% and 23.5%, respectively, for the week.
The squeeze on renewable energy stocks
Early in the week, we had the return of Roaring Kitty (or so we think), a popular Reddit personality who caused a lot of volatility and short squeezes in early 2021. But the individual had been silent for three years, and a single tweet sent the market into a bit of a frenzy.
Companies that were the most affected were those with large short positions. What investors want to look at is the number of shares sold short compared to the number of shares freely "floating" in the market, which you can see below. With such a high short interest, it's no wonder SunPower stock was up so much this week.
SPWR percent of float short, data by YCharts.
A short squeeze is just a short-term trading phenomenon, and it won't stick if financials don't significantly improve for these companies. But that's where some initial signs in the market could be helpful.
Interest rates might be improving
The major headwind that renewable energy companies faced was rising interest rates, and that's turned in their favor over the past few weeks, as you can see below.
10-year Treasury rate data by YCharts.
For solar installers and finance companies, like SunPower and Sunnova, lower interest rates make it easier and more profitable to build projects that are often financed over decades. A lot of the pressure these companies have felt has been from higher rates, so any relief will be cheered by the market.
Charging companies face similar dynamics, whether they're financing installations themselves, or financing is just a driver of demand for chargers.
What's the future for renewable energy stocks?
Some possible improvements are coming to the solar industry in the back half of the year as higher rates and changes to energy metering structures in California work their way through the system. Most companies have discussed the second half of the year as when they see those improvements taking hold.
The problem is really that it's not clear how profitable they'll be with higher rates. And the same can be said for ChargePoint and Blink Charging, which have never been able to report a consistent profit.
There could be signs of hope this week, but investors should be cautious until that leads to growing revenue and profits.
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Travis Hoium has positions in SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
