Goldman Sachs has given some big upgrades to U.S. solar stocks, namely First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR) and MEMC Electronic Materials, Inc. (NYSE:WFR). Not long after the report came out, we started to see some significant gains in these companies’ stock prices.

First Solar rose as much as 8 percent, while MEMC Electronic Materials rose as much as 7 on Thursday after Goldman Sachs analysts named the two companies as the most attractive solar stocks. The firm also named SunPower in its report, and that company’s stock rose as much as 3 percent.

Upgrades To First Solar, MEMC Electronic, SunPower

Today’s report came from Goldman Sachs analysts Brian Lee, Thomas Daniels and Britt Boril. Across their solar coverage, they increased their price targets by an average of 39 percent. On average in solar, they see a 4 percent upside to their estimates.

They upgraded MEMC Electronic Materials, Inc. (NYSE:WFR) to buy and added it to their conviction list, calling it their “top idea.” They see a 31 percent upside to their new $10 price target for the stock. The analysts also upgraded First Solar, Inc. (NASDAQ:FSLR) to buy from neutral, saying they see a “high-quality opportunity” in this stock. They set a new $64 price target for the stock, and they see a 24 percent upside to that target.

Their upgrade for SunPower Corporation (NASDAQ:SPWR) took the stock from sell to neutral. They see a 9 percent downside to their new $18 price target.

U.S. Solar 2.0 According To Goldman Sachs

So what’s changed in the U.S. solar industry to warrant all these upgrades? Solar stocks in general have been going higher and higher. They note that year to day stock returns across their clean energy coverage have outperformed their coverage year to day.

YTD stock returns across our clean energy coverage

SolarCity Corp (NASDAQ:SCTY), which is headed up by Elon Musk, has outperformed their coverage by more than 300 percent. First Solar, Inc. (NASDAQ:FSLR) and MEMC Electronic Materials, Inc. (NYSE:WFR) have also done extraordinarily well against their coverage.

The Two Big Shifts In U.S. Solar

The analysts also said they see two major changes occurring within the U.S. solar industry. They said the biggest change seems to be an evolution of business models toward solar projects rather than components. The chart shows just how significantly the shift has occurred between 2008 and 2012.

solar projects vs component

In their view, earnings from U.S. solar companies have stabilized largely because of this shift.

The other big change they see is that solar companies are shifting away from the European market toward North America and also emerging markets like Japan, South America, India and the Middle East.

sales hinge on US emerging markets not europe