Plug Power Inc.’s stock (PLUG, -3.81%) fell 1.2% in early trade Thursday, after SIG Susquehanna downgraded the stock to neutral from positive and said it expects the residential alternative energy segment’s recent headwinds to continue into the first half of the year before a demand pickup. Analysts led by Biju Perincheril also downgraded SunPower Corp. (SPWR, -0.51%) to neutral from positive.
Weak Demand in the U.S. Residential Solar Market
Recent discussions with companies indicate that the U.S. residential solar market demand remains weak, led by a slower than expected recovery in California from NEM (met energy metering) changes and softening demand in Southern states, according to the analysts at SIG Susquehanna. They wrote in a note to clients, “Companies noted some slight sequential improvement in non-CA markets to begin 4Q, but still expect an industrywide contraction in ’24.”
SEIA’s Forecast and SIG Susquehanna’s Expectations
The Solar Energy Industries Association (SEIA) is anticipating a 12% decline in U.S. residential installations in 2024, a 5% decline from its previous forecast. This is attributed to higher interest rates, flattening utility prices, and net metering changes. On the other hand, SIG Susquehanna expects a nearly 10% decline for the U.S., but factors in a modest tailwind to demand in the second half as interest rates come down.
Potential Tailwinds for Future Growth
Beyond the near-term weakness, analysts at SIG Susquehanna believe that falling equipment prices, continued increase in utility rates, and potential improvement in cost of capital could all be tailwinds in the second half of 2024 and into 2025. They are modeling an overall U.S. residential demand growth of 10-12% year over year in 2025.
SunPower’s stock was not yet active, but it has experienced a decline of 79% in the last 12 months, while the S&P 500 has gained 20.5%.