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Solar Company Shares Are Stuck in the Shade

Rogelio Mora (CQ), left, Tyler Smith, center, and Randy Murray, right, workers from inRogelio Mora (CQ), left, Tyler Smith, center, and Randy Murray, right, workers from in
Vivint workers install solar panels.Photograph by Anne Cusack — LA Times via Getty Images

After their hot rally at the end of last year, shares of solar energy firms have turned ice cold as concerns about slower growth and regulatory uncertainties plague the group.

SolarCity (SCTY) led the sell-off on Tuesday after the company cut its 2016 forecast for solar panel installations late on Monday and posted a larger-than-expected quarterly loss. The stock, down 25% at $16.94, was on track for its worst decline in three months and is down 66.8% for the year.

Shares of Sunrun (RUN) run lost 12.1% to $6.49 and are down 45% for the year. Vivint Solar, which also announced a first-quarter loss after the bell on Monday, shed 4% to $2.38 on Tuesday and is down 75% since Dec. 31.

Investors have been worried about the outlook for growth for the solar sector, especially following a pullback in an important Nevada solar support policy and uncertainty about pending regulatory decisions in other states.

Nevada regulators this year announced changes that mean new tariffs that will raise fees solar customers pay to use electric grids. Reimbursements to users are also being cut and investors fear such moves could be repeated in other states.

“For the longer term, solar is still viable, but right now on Wall Street, no one has any confidence in the regulatory environment for the state level,” said Robert Lutts, president and chief investment officer at Cabot Money Management in Salem, Massachusetts.

“Are we encouraging future solar growth, not only on the residential side but on the utility side? That’s a question that nobody knows the answer to until we see more regulatory changes,” said Lutts, who sold his solar shares last year.

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SunEdison, once the fastest-growing U.S. renewable energy company, filed for bankruptcy protection last month after some debt-fueled acquisitions proved unsustainable.

Solar shares were among Wall Street’s darlings in previous years, with some companies posting triple-digit annual gains.

Just last December, solar shares rallied after federal lawmakers reached a deal to extend investment tax credits beyond 2016.

The Guggenheim Solar Invest exchange-traded fund was down just 1.6% in early afternoon trading on Tuesday but appeared to be resuming its bear trend, down 56% from its early 2015 peak. SolarCity is its largest holding.

At least six brokerages cut their price targets on SolarCity following the company’s results.