Wells Fargo is increasingly bullish on shares of First Solar , Sunnova Energy and Sunrun , expecting margins to improve as supply chains ease and raw material costs fall. Analyst Michael Blum upgraded all three clean energy stocks to overweight in a note to clients on Friday, stating the tailwinds of growing demand for solar in the middle of the European energy crisis and the recently passed Inflation Reduction Act in the US “When the Fed continues to tighten in early 2023 it will likely act as. The near-term headwinds, fundamentals and regulations are better in 2023 and beyond,” he wrote. “With most of the regulatory overhang in the rearview mirror, strong fundamental demand (especially in Europe), and legislative support from the IRA, we are more bullish.” Shares of all three stocks gained more than 1% before the bell. Easing of regulatory headwinds, and increasing margins and supply chains should also benefit this stock in the months – and years – ahead, Blum said. The benefits of the legislation have also not been reflected in stock prices, he said. Shares of First Solar posted strong prices in 2022, rising nearly 72% and benefiting from a shift to alternative energy amid unrelenting oil market volatility. Many have also come to see solar deposits as the main beneficiary of tax credits from the government’s climate bill. “While the low-hanging fruit of the IRA may be a discount on the stock at this time, the potential for continued capacity expansion over the coming years could be further advanced,” Blum wrote, while raising the stock’s price target to $188. , representing a 29% rise from Thursday’s close. Blum expects Sunnova and Sunrun, meanwhile, to benefit from the power purchase agreement model they will get next year. “Various add-ons (e.g. low-income projects, domestic content, and energy communities) are only available for solar financing transactions structured as leases/PPAs,” Blum said. This should allow both companies to take more tax credits and beat smaller residential solar providers. Blum raised his price target on Sunrun to $32 per share, while lowering his expectations for Sunnova to $24. This represents a 44% and 40% increase from Thursday’s close for each stock. – CNBC’s Michael Bloom contributed reporting