Silicon Valley’s premier solar company, SolarCity SCTY, is struggling to become cash flow positive by the year’s end. The largest U.S. rooftop solar installer posted a wider loss of $2.10 per share in the third quarter, about 11 cents deeper in the red than what analysts had expected. Not surprisingly, shares of SolarCity tumbled over 18% in after-hours trading yesterday.

In marked contrast to the loss, SolarCity posted total revenues of $113.9 million in the quarter, beating Street expectations by 6.4%. On a year-over-year basis, reported revenues soared 95.1% on the back of increased operating leases and solar energy systems incentives as well as higher solar energy systems and components sales.

In its shareholder letter, SolarCity divulged that it expects its per-share losses to grow to $2.60 to $2.75 in the fourth quarter, more than double the $1.33 per share loss incurred in the year-ago quarter. Moreover, the company expects 878−898 megawatts (MW) of installations for 2015, down from a July forecast of 920−1,000 MW.

But one should not come to a hasty conclusion on solar companies or even on the alternative energy sector solely on the basis of SolarCity’s mounting losses. The reason why SolarCity is incurring loss after loss is because of its stepped-up investments. The company is rapidly expanding its business and winning customers before it loses a key federal tax credit in 2017.

The 30% tax credit for solar systems on residential and commercial properties is expected to drop to 10% in 2017. The money being invested in its business is currently weighing on its bottom line.

If one sees the broader picture, alternative energy sources have gradually made inroads into the global energy mix due to its clean burning nature and a growing awareness among the masses regarding its benefits. Burgeoning population, economic growth, stricter regulations as well as new technologies are transforming the energy landscape like never before.

CO2 emissions from power plants fell 15% between 2005 and 2013. The steep decline in emissions albeit came on the back of a vicious recession and cheap natural gas pushing out coal. Broad-based policy support also saw the steady rise in wind and solar power supported by improving efficiency and energy-storage options. Importantly, the Obama administration’s vow for CO2 reduction of 28% by 2025 and 32% by 2030, from 2005 levels, is acting as a catalyst.

If you’re disgruntled with SolarCity losses, we bring to your focus three leading solar plays that are making the most of the favorable industry dynamics. After all, it’s good to be in the renewable business right now.

JA Solar Holdings Co., Ltd. JASO

JA Solar has a diversified pan-continental customer base comprising the U.S., Germany, Italy, Spain, India, Korea, Japan and China. It is constantly working on pushing the boundaries of its customer base. The company had posted solid second-quarter results buoyed by higher shipments and expects its shipments to grow by 17% in the third quarter. As China has pledged to increase energy consumption from renewable sources to 20% by 2030, JA Solar will likely reap the benefits.

The stock’s Zacks Rank #2 (Buy) adds to its appeal. It has a P/E (F1) of 6.81 and has expected earnings growth of 41.1% for the current year.

First Solar Inc. FSLR

First Solar manufactures solar modules with an advanced thin film semiconductor process that significantly lowers solar electricity costs.

The company, with a Zacks Rank #2, is busy building solar plants for major U.S. power companies apart from its business of manufacturing and supplying panels. Recently, it reported stellar third-quarter results wherein its adjusted earnings soared 454% year over year.

The company also raised its full-year earnings guidance. Higher revenues in the third quarter came on the back of rising third-party module sales and an increase in systems revenue across multiple projects.

The stock has a P/E (F1) of 17.03.

Canadian Solar Inc. CSIQ

Canadian Solar caters to a geographically diverse customer base spread across key markets in the U.S., Canada and Europe, as well as emerging markets like South Korea, Singapore and Brazil. The company, which has a strong pipeline of projects, continues to engage in acquisitions and adopt various strategies to further consolidate its position. It acquired Recurrent Energy, LLC, a leading North American solar energy developer, thereby strengthening its hold in the business of ownership and development of solar power plants in North America.

Recently, Canadian Solar raised its shipment, revenue and gross profit guidance for the third quarter of 2015, which is scheduled for release on Nov 10. The improved outlook mainly reflects better-than-expected solar demand in the quarter and sale of 51% of the 200-MW Tranquillity solar power project in California by the company's wholly owned subsidiary, Recurrent Energy, to Southern Power, a unit of Southern Company SO.

Canadian Solar presently holds a Zacks Rank #2 and is trading at a forward PE of 10.95.

Bottom Line

Despite a multitude of macro challenges like deflationary worries in Europe, slowdown in China and Japan, along with the slump in the oil & gas market, the long-term outlook for the alternative energy space has held up pretty well. The latest report from the U.S. Energy Information Administration shows that renewable energy will be the fastest growing power source through 2040. And at the forefront of the green economy will be the leading solar plays discussed above.

The Zacks Industry Rank for Solar is #77 out of 257. This corresponds to the top one-third of the list, implying a positive outlook.

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