Cutting Solar Stock Valuations as Senate GOP Tax Proposal Proves Worse Than Expected

On June 16, Senate Republicans unveiled their tax bill proposal, which would maintain tax credits for nuclear and battery storage, phase out wind and solar tax credits on an accelerated timeline, and end rooftop solar incentives at year-end 2025.

Why it matters: We see the proposal as better than expected for nuclear and battery storage, in line with expectations for utility-scale wind and solar and worse than expected for rooftop solar. Additionally, language pertaining to claiming multiple domestic manufacturing incentives was introduced but unclear.

• The earlier House version of the tax bill called for ending rooftop solar incentives at year-end 2025, but there were expectations in the market that the Senate would make positive changes. This turned out not to be the case, sending rooftop solar equities like Enphase, SolarEdge, and Sunrun tumbling.
• The other surprise is language to limit domestic manufacturers from claiming multiple credits on components as to one credit on the final component. This creates uncertainty for First Solar, which saw shares fall 18% at the time of writing.

The bottom line: We are reducing our fair value estimates for Enphase, SolarEdge, and Sunrun by 20%, 17%, and 35%, respectively, as we expect the reduced rooftop solar incentives to lead to a material drop in US rooftop solar installations beginning in 2026 if they’re finalized.

• We are maintaining our fair value estimates for our utility-scale solar coverage, including First Solar, Nextracker, and Shoals.
• We view First Solar shares as slightly undervalued after today’s selloff, assuming its ability to claim multiple domestic manufacturing credits is unchanged. Our $168 fair value estimate assumes the company is able to claim $0.17 per watt value on domestically produced solar panels. If language is passed to restrict the value to only the final module, the company would only be able to claim $0.07 per watt and our fair value estimate would decline to $128.
• The tax bill still has a long way to go to being finalized and could see further changes. The Senate will need to pass its version before it and the House attempt to reconcile any differences prior to sending it to President Donald Trump ahead of a July 4 targeted deadline.