In this article, we discuss 10 renewable energy stocks to buy and hold for the next 10 years.
The Inflation Reduction Act adds further certainty to the fact that electric utilities and power generation firms will continue to transition towards green power sources at a rapid rate. However, this transition will take a few years. The U.S. Energy Information Administration reported that in the first half of 2022, the United States generated 462% more electricity from renewables than fossil fuels, compared to 2021 levels.
During the first six months of 2022, 25.3% of the electricity in the United States was attributed to renewable energy sources, which is 3 percentage points more than the same period last year. To put it in perspective, electricity generation from coal between 2007 and 2021 in the United States fell by 1,117 terawatt-hours (TWh). It was replaced by 678 TWh of new gas-fired generation and 505 TWh of wind and solar generation.
Ken Bossong, executive director of the SUN DAY Campaign, reviewed the EIA data, and said:
“Now providing one-quarter of the [US’s] electrical output, it is conceivable that with the incentives provided by the new Inflation Reduction Act, wind, solar, and other renewables will reach the one-third point within the next few years and dominate electrical generation thereafter”.
Energy prices have increased drastically due to multiple factors, such as pent-up post-pandemic demand and supply constraints emerging from the Russia-Ukraine war. The volatile energy prices will escalate the inevitable global shift to renewable energy, and several renewable energy firms are positioned to benefit in the coming years. Some of the best renewable energy stocks to buy and hold for the long-term include Sunrun Inc. (NASDAQ:RUN), Enphase Energy, Inc. (NASDAQ:ENPH), and Plug Power Inc. (NASDAQ:PLUG).
Photo by Jason Blackeye on Unsplash
Our Methodology
We selected the renewable energy firms that are positioned to grow in the coming years, with expansion and funding opportunities on the horizon. Additionally, these firms either reiterated or raised guidance for the year and recently received positive analyst coverage.
The stocks have been ranked according to hedge fund sentiment, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
Best Renewable Energy Stocks to Buy and Hold for the Next 10 Years
10. Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN)
Number of Hedge Fund Holders: 10
Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN) is a Singapore-based company that manufactures and sells solar panels and solar system components worldwide. The stock has gained about 90% in the last six months as of August 26, and Maxeon Solar Technologies, Ltd. will be a beneficiary of the new climate bill, as it brings the firm closer to constructing its first American solar manufacturing facility.
On August 18, Morgan Stanley analyst David Arcaro raised the price target on Maxeon Solar Technologies, Ltd. to $21 from $14 and maintained an ‘Equal Weight’ rating on the shares. The analyst increased growth rates for solar, wind, energy storage, and clean hydrogen, and raised targets on most clean tech stocks, on the back of the new Inflation Reduction Act.
Among the hedge funds tracked by Insider Monkey, 10 funds were bullish on Maxeon Solar Technologies, Ltd. at the end of Q2 2022, up from 7 funds in the earlier quarter. The collective stakes in Q2 increased to $11.8 million from $3.90 million in Q1.
In addition to Sunrun Inc., Enphase Energy, Inc., and Plug Power Inc., Maxeon Solar Technologies, Ltd. is one of the renewable energy stocks to buy and hold for the next decade.
9. ChargePoint Holdings, Inc. (NASDAQ:CHPT)
Number of Hedge Fund Holders: 17
ChargePoint Holdings, Inc. (NASDAQ:CHPT) is a California-based company that provides electric vehicle charging networks in the United States and internationally, serving commercial, fleet, and residential customers. On July 27, ChargePoint Holdings, Inc. announced that it signed a collaborative partnership with Charge Across Town to install EV chargers at multi-family establishments across California. ChargePoint Holdings, Inc. has been allotted $4.25 million under California Energy Commission’s REACH program to set up hundreds of EV charging ports at apartment buildings and condos, with 75% of the funds to be utilized for buildings in low income areas.
On August 23, JPMorgan analyst Bill Peterson raised the price target on ChargePoint Holdings, Inc. to $20 from $18 and reiterated an ‘Overweight’ rating on the shares ahead of the company’s Q2 results. The analyst lifted revenue estimates for Q3 and for fiscal 2023 as he thinks some supply troubles will ease, but “significant inflationary pressures” across the supply chain will pressure margins. However, with tailwinds from the Bipartisan Infrastructure Law signed last year and the Inflation Reduction Act of 2022, stronger electric vehicle growth lies ahead. This will potentially result in higher growth for ChargePoint Holdings, Inc. in the future, the analyst told investors.
According to Insider Monkey’s Q2 data, 17 hedge funds held stakes worth $22.8 million in ChargePoint Holdings, Inc., compared to 16 funds in the prior quarter with stakes worth $34.7 million.
Here is what the Alger Mid Cap Focus Fund had to say about Chargepoint Holdings Inc. in its Q1 2021 investor letter:
“ChargePoint Holdings, Inc. was among the top detractors from performance. ChargePoint provides a network of electric vehicle (EV) charging stations globally. Like equities of many businesses geared to electric vehicles, ChargePoint shares underperformed in the first quarter of 2021 as part of a broad rotation away from high-growth technology companies with limited track records of performance as public companies. Longer term, Charge Point could potentially serve as a bellwether company of the fast growing EV category and we believe it is an attractive way to gain exposure to EV adoption without betting on whether a particular EV brand will win in the marketplace. Additionally, EVs are a massive end market.”
8. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 19
Brookfield Renewable Partners L.P. (NYSE:BEP) owns a portfolio of renewable power generating facilities in North America, Colombia, Brazil, Europe, India, and China. Brookfield Renewable Partners L.P. generates electricity by utilizing hydroelectric, wind, solar, and biomass sources. The company’s Q2 revenue of $1.27 billion outperformed market estimates by $130 million and grew 24.5% on a year-over-year basis. Brookfield Renewable Partners L.P. declared a $0.32 per share quarterly dividend on August 8, in line with previous. The dividend is distributable on September 29, to shareholders of record on August 31. The stock’s forward yield is 3.19%.
Also on August 8, JPMorgan analyst Mark Strouse raised the price target on Brookfield Renewable Partners L.P. to $43 from $41 and kept an ‘Overweight’ rating on the shares. The analyst sees the Inflation Reduction Act as the most significant policy change to increase growth in an “already inevitable energy transition to renewables”.
Among the hedge funds tracked by Insider Monkey, 19 hedge funds were bullish on Brookfield Renewable Partners L.P. at the end of Q2 2022, compared to 18 funds in the earlier quarter. Select Equity Group is the leading stakeholder of the company, with approximately 2.6 million shares worth $90 million.
Here is what theClearBridge Investments Global Infrastructure Income Strategy had to say about Brookfield Renewable Partners L.P. in its Q1 2022 investor letter:
“Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada, focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi- technology renewables business makes it an attractive partner. Brookfield’s development pipeline stands at 18,000 MWs, providing confidence the company can meet its targeted double- digit cash flow growth through to 2025. The market narrative around the energy transition and energy security, along with increasing fossil fuels prices which have driven greater focus on switching to renewables, helped Brookfield shares in the quarter.”
7. SunPower Corporation (NASDAQ:SPWR)
Number of Hedge Fund Holders: 21
SunPower Corporation (NASDAQ:SPWR) is a California-based solar technology and energy services provider in the United States and Canada. The stock has climbed about 40% in the last six months as of August 26. SPWR shares gained roughly 14% on August 2 as the firm reported Q2 adjusted earnings in line with Wall Street’s consensus estimates, which included GAAP revenues climbing by 60% year-over-year to $418 million. The company had 19,700 new customers in Q2, which represented a 51% YoY increase. SunPower Corporation will also benefit from the clean energy initiatives in the Inflation Reduction Act.
Morgan Stanley analyst Stephen Byrd raised the price target on SunPower Corporation to $31 from $22 on August 18 and maintained an ‘Equal Weight’ rating on the shares. The analyst raised growth rates for clean energy stocks due to the support featured in the new U.S. climate bill. The bill will escalate the decarbonization of the U.S. economy and raise domestic manufacturing, the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, D E Shaw held a notable position in the company, comprising 2.5 million shares worth about $40 million. Overall, 21 hedge funds were bullish on SunPower Corporation at the end of June 2022.
6. Shoals Technologies Group, Inc. (NASDAQ:SHLS)
Number of Hedge Fund Holders: 23
Shoals Technologies Group, Inc. (NASDAQ:SHLS) is a Tennessee-based provider of electrical balance of system (EBOS) solutions for solar energy projects in the United States. The company posted its Q2 results on August 15, reporting GAAP earnings per share of $0.04, in-line with the market consensus. The company’s revenue of $73.5 million climbed 23.1% year-over-year and exceeded estimates by $0.6 million.
On August 16, Roth Capital analyst Philip Shen raised the price target on Shoals Technologies Group, Inc. to $40 from $20 and maintained a ‘Buy’ rating on the shares. The analyst observed that the company posted a strong Q2 and reaffirmed its 2022 guidance. Management seems to be navigating well through the UFLPA detention constraints, possibly driven by a significant amount of First Solar, Inc. (NASDAQ:FSLR) and safe harbor projects, the analyst added.
According to Insider Monkey’s data, 23 hedge funds were bullish on Shoals Technologies Group, Inc. at the end of June 2022, up from 16 funds in the preceding quarter. Encompass Capital Advisors held the biggest position in the company, owning 3.17 million shares worth $52.2 million.
Like Sunrun Inc., Enphase Energy, Inc., and Plug Power Inc., Shoals Technologies Group, Inc. is one of the renewable energy stocks to watch amid the global transition to clean energy.
Here is what ClearBridge Investments had to say about Shoals Technologies Group, Inc. in its Q2 2021 investor letter:
“Our largest new addition was Shoals Technologies, in the industrial sector, which manufactures electric balance of systems (EBOS) components for ground-mounted solar projects. The company has IP protection around a system of EBOS installation that does not rely on licensed electricians for installation and can be installed above ground, thereby offering the customer significant time and labor savings.”
5. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 24
Bloom Energy Corporation (NYSE:BE) was incorporated in 2001 and is headquartered in San Jose, California. The company designs and manufactures solid-oxide fuel cell systems for on-site power generation. On August 17, Bloom Energy Corporation priced its underwritten public offering of 13 million common shares at a public offering price of $26 per share, for expected gross proceeds of $338 million. The offering concluded on August 19.
On August 25, BofA analyst Julien Dumoulin-Smith resumed coverage of Bloom Energy Corporation with a ‘Buy’ rating and an unchanged price target of $34 after the equity raise. He continues to see momentum for the rest of 2022 at Bloom Energy Corporation and argued that “many opportunities” are not factored in the present share price.
According to Insider Monkey’s data, 24 hedge funds were bullish on Bloom Energy Corporation at the end of June 2022, compared to 29 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a prominent shareholder of the company, with more than 1 million shares worth $17 million.
4. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 25
Sunnova Energy International Inc. (NYSE:NOVA) is a Texas-based company that provides residential solar energy systems in the United States. On August 17, Sunnova Energy International Inc. priced a $500 million aggregate principal amount of 2.625% convertible senior notes due 2028 in a private placement. The net proceeds from the upsized offering are estimated to be $487 million. The sale of the notes closed on August 19.
On August 4, Barclays analyst Christine Cho initiated coverage of Sunnova Energy International Inc. with an ‘Overweight’ rating and a $35 price target. The analyst has a Positive view of the North American clean technology space. Within residential solar, she sees Sunnova Energy International Inc. as one of the best positioned firms. The case for solar is “as attractive as it’s ever been and this secular growth trend will continue,” the analyst told investors. She said the Inflation Reduction Act of 2022 “provides tailwinds after several setbacks” for the sector.
According to Insider Monkey’s Q2 data, Sunnova Energy International Inc. was part of 25 hedge funds’ portfolios, compared to 26 funds in the prior quarter. Electron Capital Partners is a prominent shareholder of the company, with more than 3 million shares worth $56.5 million.
Here is what the Clearbridge Investments Small Cap Strategy had to say about Sunnova Energy International Inc. in its Q1 2022 investor letter:
“We initiated a new position in Sunnova, in the energy sector. Sunnova is a residential solar and energy storage company that enables adoption through a network of installers with options for financing, service and broader home energy management. Rising interest rates and solar energy supply constraints weighed on the stock’s performance in the fourth quarter of 2021 but created a compelling valuation opportunity to buy this business when the market was embedding low growth expectations. We believe Sunnova will deliver value accretive growth for a much longer time, with its downside limited by the long-term, fixed-rate, high- quality contracts it has with customers.”
3. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 26
Plug Power Inc. is a New York-based company that provides clean hydrogen and zero-emissions fuel cell solutions. On August 25, Plug Power Inc. stock gained 14.4% after the company announced an agreement to deliver liquid green hydrogen to Amazon.com, Inc. (NASDAQ:AMZN) beginning in 2025 to enable decarbonization of the latter’s operations. The Amazon deal will supply 10,950 tons per annum of liquid green hydrogen starting in January 2025, a growth initiative that is forecasted to help Plug Power Inc. reach its $3 billion revenue goal by 2025.
Craig-Hallum analyst Eric Stine raised the price target on Plug Power Inc. to $38 from $31 on August 26 and maintained a ‘Buy’ rating on the shares. The green hydrogen supply agreement with Amazon solidifies the relationship between the companies, the analyst told investors in a bullish thesis.
Among the hedge funds tracked by Insider Monkey, D E Shaw is the biggest stakeholder of Plug Power Inc., with 3.6 million shares worth about $60.5 million. Overall, 26 hedge funds were long Plug Power Inc. at the end of Q2 2022, compared to 33 funds in the earlier quarter.
2. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 36
Sunrun Inc. was founded in 2007 and is headquartered in San Francisco, California. The company develops and installs residential solar energy systems in the United States. The company reported Q2 revenue of $585 million, up 45.7% year-over-year, beating estimates by $83.7 million. Solar energy capacity installed in the second quarter of 2022 was 246.5 megawatts, up 33% from the prior year quarter. The firm’s management continues to expect growth in solar energy capacity installed to be 25% or more for the full year 2022.
Morgan Stanley analyst Stephen Byrd raised the price target on Sunrun Inc. to $79 from $70 and reaffirmed an ‘Overweight’ rating on the shares. The analyst said that the Inflation Reduction Act will offer the required support to boost decarbonization technologies that are on the verge of being commercially viable.
Among the hedge funds tracked by Insider Monkey, William B. Gray’s Orbis Investment Management held the biggest position in Sunrun Inc., with roughly 13 million shares worth $303 million. Overall, 36 hedge funds were bullish on the stock at the end of June, compared to 37 funds in the previous quarter.
Here is what Horizon Kinetics had to say about Sunrun Inc. in its Q2 2021 investor letter:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.
You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.
In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.
In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).
For the time being, Sunrun loses an extraordinary amount of money, an amount that has been getting larger. Perhaps there are economies of scale that will manifest in the future,so that it will attain profitability. Perhaps from the roughly one-half of Sunrun’s revenues that are from long-term customer service agreements that run up to 25 years. For now, though, the company would seem to require a lot of external financing, and that is one of the greatest business risks.”
1. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 53
Enphase Energy, Inc. is a California-based company that develops and manufactures home energy solutions for the solar photovoltaic industry in the United States and internationally. On July 26, Enphase Energy, Inc. reported its Q2 2022 results, posting earnings per share of $1.07 and revenue of $530 million, outperforming estimates by $0.22 and $24.8 million, respectively. The company announced upbeat guidance for Q3, expecting revenue of $590 million-$630 million, well above the $549 million consensus estimate.
On August 11, KeyBanc analyst Sophie Karp raised the price target on Enphase Energy, Inc. to $363 from $230 and kept an ‘Overweight’ rating on the shares. Enphase Energy, Inc. should continue to benefit from the Inflation Reduction Act. While she believes that in the short-term the stock might lag due to investor positioning, in the long-term, she expects Enphase Energy, Inc. to deliver resilient top-line and earnings growth. Enphase Energy, Inc. continues to execute and outperform expectations as it is one of the best positioned names in her Alternative Energy coverage, the analyst contended.
According to Insider Monkey’s data, 53 hedge funds were bullish on Enphase Energy, Inc. at the end of Q2 2022, compared to 57 funds in the earlier quarter. Philippe Laffont’s Coatue Management is the leading position holder in the company, with 1.36 million shares worth $267 million.
Here is what the ClearBridge Investments Sustainability Leaders Strategy had to say about Enphase Energy, Inc. in its Q1 2022 investor letter:
“Enphase Energy is a key solar holding that should be able to take advantage of greater incentives for solar installations in many geographies. The company was also a strong contributor for the quarter, overcoming pressures of a higher discount rate on their strong projected future earnings, raw material inflation and supply chain challenges as their long-term value was reaffirmed.”
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This article is originally published at Insider Monkey.
