SolarEdge, SunRun, Enphase Energy stocks and the bursting ESG bubble

ESG has been a major market theme in the past decade. At its peak, the industry had over $41 trillion in assets and analysts predicted they would hit $45 trillion by 2025. Recently, however, there are signs that the ESG bubble is bursting.

On Wednesday, I wrote about companies in the wind energy industry like Vestas Wind Systems and Orsted, whose stocks have plunged hard in the past few months. They are not alone as companies like Siemens Energy have also collapsed as costs in the sector have jumped.

Most importantly, oil and gas companies that made big bets on clean energy like Shell and BP have backtracked. They have shifted their strategy and are now focusing on the oil and gas companies. 

Meanwhile, ESG-focused ETFs have underperformed the broader market. The iShares ESG Aware ETF (ESGU) has lagged the SPDR S&P 500 ETF in the past 12 months. The same is true with the Vanguard ESG US Stock ETF (ESGV) and iShares Global Clean Energy ETF (ICLN).

In addition to the wind energy industry, solar stocks have also been in a freefall. The SolarEdge (NASDAQ: SEDG) stock price plunged by over 20% in the premarket session. It plunged to a low of $61, the lowest point since September 2021. The shares have slipped by over 80% from the highest point on record.

SolarEdge shares collapsed after the company’s revenue dropped by 13.2% YoY to $725 million. It also pointed to more weakness in the business and high inventory levels in the company. The CEO noted:

“Market demand began to slow in the third quarter, and distributors began to experience financial challenges. As a result, we received a large amount of requests to cancel or push out orders.”

Other solar companies have not done well. SunRun (RUN) stock price has plunged to $9.49 from its all-time high of $101. It now sits at the lowest point since April 2020. Similarly, as I wrote here, Enphase share price crashed to $76 from an all-time high of $76.

These companies face a similar challenge. High interest rates make it quite expensive for families to afford or even focus on solar energy. Instead, many people are now focusing on consumer staples products like food and shelter.

At the same time, these companies are battling with high funding costs and an overall slowing economy. While the US expanded by 4.9% in the third quarter, estimates are that it will grow by less than 2% in Q4.

SunRun, Enphase Energy, SolarEdge stocks