Higher interest rates have been a headwind for many sectors, including solar energy. As the Federal Reserve may pivot to rate cuts next year, hope is on the horizon for the renewable energy sector. In turn, Jefferies has initiated coverage on a number of solar stocks — including Enphase Energy (ENPH) and First Solar (FSLR) — with a "Buy" rating.

Yahoo Finance Reporter Madison Mills joins the Live show to break down the announcement from Jefferies and what it means for the solar sector going forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

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BRAD SMITH: The increased cost of capital from the Fed's interest rate policy has been a headwind for companies across the board. One industry particularly susceptible to that is solar power. Those stocks haven't had a great run this year, but the Fed's so-called pivot certainly changes the game.

Today, Jefferies initiating a slew of those stocks with a buy recommendation, including for Solar and Sunrun. Yahoo Finance's Madison Mills has the detail. Hey, Madison.

MADISON MILLS: Hey, guys. So the headline from Jefferies this morning is all about the solar coaster. And as we've been talking about, this is one of those sectors that is really going to benefit from the decrease in interest rates coming from the Federal Reserve. So what's interesting about this initiation of coverage from Jefferies is not only confirmation of what we've already been hearing on the Street that solar stocks could be in for a great year in 2024, it's also confirmation that banks are really starting to get behind the anticipation of Fed cuts coming sooner rather than later.

But zeroing in on some of these names that we've got from Jefferies here, they're looking at First Solar, Enphase, and Sunrun. And they're starting to see, again, some of those tailwinds coming from those Fed rate cuts. Also, we've got Array, Sunrun, SunPower here.

Taking a look at First Solar in particular, you can see really struggling throughout the course of this year, but starting to see an uptick today. They're actually having the most volume on the stock that they've had in weeks here as Jefferies is initiating that coverage. You can see that pop into the green this morning in pre-market. They're up about 8%, which is a great day for them over the course of the past month.

Interesting to note also from this morning's coverage of Jefferies, they say that First Solar is their top pick, that's because of some of the fundamentals here. They've got a strong backlog, supportive pricing in this declining price environment. They've also got a good balance sheet and some good margins as well. So just another reminder that the fundamentals still matter even when a broader sector group is going to be performing well.