Invesco Solar ETF Falls over 12% Following Election

The Invesco Solar ETF (NYSE: TAN) dropped more than 12% on Wednesday after Trump's presidential victory. Analysts from Deutsche Bank (ETR: DBKGn) indicated that this election outcome may pressure solar stocks by reducing incentives.

With a Republican-controlled White House and Senate, a policy shift could dampen sentiment in the solar sector. Deutsche Bank suggests that the administration might reduce parts of the Investment Tax Credit (ITC), particularly the "adders" that enhance incentives for low-income and community solar developments.

These adders can increase the 30% ITC by an additional 10% for certain projects. Deutsche Bank warns that many of these adders could be reversed under a Trump administration.

The solar companies likely to be most affected by potential ITC adjustments include Sunrun (NASDAQ: RUN) and Sunnova (NOVA), both having significant exposure to residential solar markets, which could suffer if incentives are reduced.

The analysts observed, "We see increased risks to RUN and NOVA due to their exposure to the ITC," indicating that a rollback could impact cash flow.

They noted that the election result also poses moderate risks for Enphase (ENPH) and SolarEdge (NASDAQ: SEDG), both of which depend heavily on the residential market. Enphase, in particular, derives about 70% of its revenue from the U.S.

On the other hand, First Solar (NASDAQ: FSLR), more focused on commercial projects and benefiting from production tax credits, may be less disturbed by policy changes. However, Deutsche Bank warns that FSLR could face some volatility before stabilizing.

While analysts expect the policy shift to affect overall solar demand, they also predict that Trump’s pro-domestic manufacturing stance may ultimately benefit companies like First Solar, especially if tariffs remain or are increased.