Wall Street misread the solar tariffs, says climate finance expert

Wall Street analysts have been caught off guard by the market's reaction to the recent announcement of new solar tariffs, according to Matt Roling, a climate finance expert and professor at Northwestern's Kellogg School of Management. In an interview with Investing.com, Roling pointed out that investors have focused on which solar companies were affected, rather than the fact that stocks of companies that were set to lose from the tariffs also increased.

Ruling out First Solar (NASDAQ: FSLR) as a winner by default, Roling explained that the company manufactures its solar panels using cadmium telluride, not silicon. This makes First Solar immune to the tariff that applies to the silicon supply chain. The expert believes that Corning (NYSE: GLW), which co-owns Hemlock Semiconductor – one of only two U.S. polysilicon plants – is the quiet structural winner. However, he noted that the stock reaction is diluted because the benefit flows through the joint venture stake.

Sunrun (NASDAQ: RUN), an installer, initially rose on the news, despite being exposed to higher costs. Roling attributed this to the market cheering for a policy that taxes solar companies, as they buy panels rather than make them themselves. Roling expressed surprise at Canadian Solar (NASDAQ: CSIQ), the name most affected by Chinese-linked sourcing.

He cautioned that the initial stock movements largely reflect the Shanghai-listed subsidiary and a one-time tariff refund. Roling also mentioned that the sector beta in the stock movements of SolarEdge (NASDAQ: SEDG) and Enphase (NASDAQ: ENPH) was not a reaction to the actual policy, as inverters sit outside the polysilicon chain.