In this article, we will take a look at the 11 most promising clean energy stocks according to analysts.
Devastating effects of climate change all over the world and rising costs of conventional energy have hastened the clean energy revolution worldwide. The Russian invasion of Ukraine and the subsequent crisis in the energy markets also forced countries, especially in Europe, to speed up their renewable energy bets and to look for alternative energy sources to cut their reliance on other countries. The broader shift to renewable and clean energy in the US was fueled by the Inflation Reduction Act which offers huge tax credits and benefits to businesses for transitioning to clean energy. According to data from American Clean Power Association, in just three months of 2022, over $40 billion worth of clean energy projects — solar, wind, battery — were announced, according to a Wall Street Journal report. The report also cited Matt Birchby, president of renewable-project developer and owner Swift Current Energy LLC, who said that there is going to be a “huge shift” in the coming years as he sees a “significant amount of electricity coming from renewables.”
One of the biggest benefits of the Inflation Reduction Act would be the cycle of innovation it would introduce in the private sector as companies flock to green energy projects to take advantage of the government-backed subsidies and incentives. The renewable energy industry has already come a long way when it comes to technology advancements and cost improvements. For example, the cost of a photovoltaic module made from crystalline silicon fell a whopping 96% during 1980 to 2021.
Execution Challenges in the Renewable Energy Markets
But amid a flurry of green energy projects being announced, there are execution problems negatively affecting the industry and causing huge delays. Part of the problem is logistical and supply-chain challenges, worsened by regulatory issues caused by US-China tensions. Rising interest rates and inflation are also slowing down several projects in the solar and wind energy spaces in the US and Europe.
One of the worst-hit areas when it comes to execution is the wind energy industry, especially off-shore wind projects. For example, according to a Bloomberg report, one of the projects that is facing delay amid rising costs is the 1.2-gigawatt Commonwealth Wind development near Massachusetts, one of the largest wind farms in the country that would be capable of powering 700,000 homes. The Bloomberg report said that unlike conventional energy projects, renewable energy projects, especially wind power installations, require a lot of capital upfront for making these plants operational. Rising costs and uncertainty can cause delays and prevent these planned projects from going live.
The Bloomberg report cited estimates which say that to become carbon neutral by 2050, the world needs to increase its renewable energy investments to a whopping $1 trillion per year.
The report also cited Thomas Arentsen, a partner at Bain & Co., who said the following about the offshore wind energy sector:
“The offshore wind business is in a brewing perfect storm. Profitability is heavily squeezed across the whole value chain from developers, to supply chain, to everybody.”
But despite these headwinds and execution delays, the clean energy industry is destined for growth. According to data from International Energy Agency, or IEA, in 2022, net additions of renewable electricity jumped to about 352 gigawatts of capacity, up from 286 GW in 2021. The IEA also increased its five-year capacity expansion estimates by nearly 30% in 2022. IEA also believes that by 2025, renewable energy will be the largest source of electricity.
Pixabay/Public Domain
Our Methodology
For this article, we first researched for renewable energy stocks and listed down at least 50 notable names in US and European stock markets operating in wind, solar, hydrogen fuel cell and other important renewable energy areas. We then checked these stocks’ one-year average price estimates and picked 11 stocks with highest upside potential from stock prices recorded on March 16. We took one-year average price estimate for each stock from Yahoo Finance.
Most Promising Clean Energy Stocks According to Analysts
11. Northland Power Inc. (NYSE:NPIFF)
Number of Hedge Fund Holders: N/A
One-Year Average Price Estimate: CAD 45.17
Canadian clean and green energy company Northland Power Inc. (NYSE:NPIFF) is one of the most promising clean energy stocks according to analysts. Northland Power Inc. (NYSE:NPIFF) is trading at CAD 33 as of March 16, while its one-year average price estimate is CAD 45. In February, Northland Power Inc. (NYSE:NPIFF) posted its Q4 results. GAAP EPS in the period came in at C$1.12. Revenue in the period inched up 0.1% to reach C$641 million.
For 2023, Northland Power Inc. (NYSE:NPIFF) expects Adjusted EBITDA to be in the range of C$1.20 billion to C$1.30 billion.
10. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 15
One-Year Average Price Estimate: $62.16
Chinese solar company JinkoSolar Holding Co., Ltd. (NYSE:JKS) ranks 10th in our list of the most promising clean energy stocks according to analysts. Earlier this month JinkoSolar Holding Co., Ltd. (NYSE:JKS) posted Q4 results. Q4 GAAP EPADS came in at $0.85, missing estimates by $0.45. Revenue in the quarter increased by about 71% on a YoY basis to reach $4.41 billion, beating estimates by $760 million.
In January, Roth Capital upgraded JinkoSolar Holding Co., Ltd. (NYSE:JKS) to Buy from Neutral. The firm also increased its price target on JinkoSolar Holding Co., Ltd. (NYSE:JKS) to $70 from $50.
9. Canadian Solar Inc. (NASDAQ:CSIQ)
Number of Hedge Fund Holders: 16
One-Year Average Price Estimate: $42.80
In February, Canadian Solar Inc. (NASDAQ:CSIQ) said for the fourth quarter, it expects to report revenues of $1.97 billion, above its guidance range of $1.8 billion to $1.9 billion. For the first quarter, Canadian Solar Inc. (NASDAQ:CSIQ) expects revenue in the range of $1.6 billion to $1.8 billion, below the consensus estimate of $2.04 billion.
Recently, Citi analyst Vikram Bagri downgraded Canadian Solar Inc. (NASDAQ:CSIQ) to Neutral from Buy. The analyst also slashed his price target for Canadian Solar Inc. (NASDAQ:CSIQ) to $44 from $45. The new price target still presents upside potential from the current levels.
8. Ormat Technologies, Inc. (NYSE:ORA)
Number of Hedge Fund Holders: 21
One-Year Average Price Estimate: $94.17
Nevada-based Ormat Technologies, Inc. (NYSE:ORA) makes alternative and renewable geothermal energy technology. As of March 16 Ormat Technologies, Inc. (NYSE:ORA) was trading at $83.6, while its one-year average price estimate is $94.17.
Earlier this month, UBS upgraded Ormat Technologies, Inc. (NYSE:ORA) to Buy from Neutral and also increased the stock’s price target to $105.
UBS analyst Jon Windham expects Ormat Technologies, Inc. (NYSE:ORA)’s adjusted EBITDA growth to jump 10% per year during 2023 to 2027. The analyst highlighted Ormat Technologies, Inc. (NYSE:ORA)’s pipeline of new geothermal, solar and storage projects.
As of the end of the fourth quarter of 2022, 21 hedge funds had stakes in Ormat Technologies, Inc. (NYSE:ORA). The total value of these stakes is $189 million. The biggest stakeholder of Ormat Technologies, Inc. (NYSE:ORA) was Ian Simm’s Impax Asset Management which owns a $155 million stake in the company.
Massif Capital made the following comment about Ormat Technologies, Inc. (NYSE:ORA) in its Q4 2022 investor letter:
“We shorted Ormat Technologies, Inc. (NYSE:ORA) last year as the firm appeared to be an unprofitable geothermal-focused independent energy producer borrowing money to grow an even less-profitable U.S. renewables energy business. Along with eroding the company’s margins, we expected numerous executional challenges in the build-out of Ormat’s new U.S. renewable business. We got impatient as it increased from our short price of roughly $75 to $100, and we closed out the position. At the time, we noted the following:
“Reviewed earnings [3rd Qtr 2022] and found that although execution had struggled, the impact was minimal, the future impact of the IRA [Inflation Reduction Act] on the firm’s independent power production is uncertain (although almost assuredly positive), as such the business appears likely to maintain, at least for some period, its high earnings margins relative to independent power producing peers. We cannot find a reason to question the high margins’ near-term sustainability, but long-term sustainability should be in question. Nevertheless, we do not see a catalyst in the future to prompt a repricing or reevaluation of the multiple being placed on unsus[1]tainably high earnings or a catalyst that will send the high margins lower in short order, despite the fact the stock is clearly overvalued on fundamental earnings and cash flow basis. Absent a catalyst, it seemed prudent to exit the position.”…” (Click here to read the full text)
7. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 24
One-Year Average Price Estimate: $29
California-based Bloom Energy Corporation (NYSE:BE) uses solid oxide fuel cells to produce electricity. This clean energy stock jumped last month after Bloom Energy Corporation (NYSE:BE) posted solid Q4 results. Adjusted EPS in the period came in at $0.27, beating estimates by $0.16. Revenue in the quarter increased by about 35.1% on a YoY basis to reach $462.58 million, beating estimates by $64.22 million.
Insider Monkey’s proprietary database of 924 hedge funds shows that 24 hedge funds had stakes in Bloom Energy Corporation (NYSE:BE) at the end of the fourth quarter of 2022. The biggest stakeholder of Bloom Energy Corporation (NYSE:BE) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $42 million stake in the company.
ClearBridge Investments made the following comment about Bloom Energy Corporation (NYSE:BE) in its Q3 2022 investor letter:
“We were active in repositioning the portfolio in the quarter as market crosswinds opened idiosyncratic opportunities, adding two new industrials companies. Bloom Energy Corporation (NYSE:BE) is an electrical equipment company that makes solid-oxide fuel cell systems for on-site power generation, serving a variety of industries. Its fuel cells convert natural gas, biogas or hydrogen into baseload (non-intermittent) electricity without combustion, so there is low or no carbon emission. We expect significant upside through its ability to support the growing hydrogen economy, with a large opportunity for this in South Korea and meaningful policy support in the U.S. via the IRA, while other markets include biogas, carbon capture and marine transportation. Its natural gas energy server business is growing in the U.S. amid higher grid reliability concerns.”
6. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 25
One-Year Average Price Estimate: $23.41
Plug Power Inc. (NASDAQ:PLUG) is under pressure after posting a weak Q4 earnings report. However, Plug Power Inc. (NASDAQ:PLUG) reiterated its guidance for FY 2023 revenues of $1.4 billion, which is better than the consensus estimate of $1.36 billion.
While Plug Power Inc. (NASDAQ:PLUG) is expected to face headwinds in the near future and face difficulties on its path to profitability, it would be a solid long-term pick in the renewable energy space. Earlier this month, Citi analyst P.J. Juvekar kept a Buy rating on Plug Power Inc. (NASDAQ:PLUG) but lowered his price target to $20 from $21. The analyst said that Plug Power Inc. (NASDAQ:PLUG) has a first-mover advantage to capture Inflation Reduction Act benefits.
5. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 39
One-Year Average Price Estimate: $41.50
California-based Sunrun Inc. (NASDAQ:RUN) makes photovoltaic systems and battery energy storage products. Sunrun Inc. (NASDAQ:RUN) ranks 5th in our list of the most promising clean energy stocks according to analysts.
In February, Sunrun Inc. (NASDAQ:RUN) posted a strong Q4 earnings report. GAAP EPS in the period came in at $0.29, beating estimates by $0.56. Revenue in the period increased by about 40% on a YoY basis to reach $609.52 million, beating estimates by $20.63 million.
At the end of the fourth quarter of 2022, 39 hedge funds tracked by Insider Monkey had stakes in Sunrun Inc. (NASDAQ:RUN). The biggest hedge fund stakeholder of Sunrun Inc. (NASDAQ:RUN) was William B. Gray’s Orbis Investment Management with a $293 million stake.
4. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 43
One-Year Average Price Estimate: $366
Israeli solar technology company SolarEdge Technologies, Inc. (NASDAQ:SEDG) ranks 4th in our list of the most promising clean energy stocks according to analysts. SolarEdge Technologies, Inc. (NASDAQ:SEDG) was one of the top picks in the solar sector by a team of analysts at Citi earlier this month.
Hedge funds also like SolarEdge Technologies, Inc. (NASDAQ:SEDG). Insider Monkey’s proprietary database of 943 hedge funds shows that 43 funds had stakes in SolarEdge Technologies, Inc. (NASDAQ:SEDG) as of the end of the fourth quarter of 2022. The net worth of these hedge funds’ stakes was $1.3 billion. The biggest stakeholder of SolarEdge Technologies, Inc. (NASDAQ:SEDG) was Richard Mashaal’s Rima Senvest Management which has a $215 million stake in the company.
3. General Electric Company (NYSE:GE)
Number of Hedge Fund Holders: 59
One-Year Average Price Estimate: $95.06
General Electric (NYSE:GE) has significant clean and renewable energy operations which makes it one of the most promising stocks in our list. General Electric (NYSE:GE) is combining its power and renewable energy business under the umbrella of GE Vernova.
Earlier this month, BofA analyst Andrew Obin said that General Electric (NYSE:GE)’s profit will rise more than expected amid the rising demand of jet engines. The analyst also praised General Electric (NYSE:GE)’s plans to improve its Vernova business. Obin said that he was “pleasantly surprised by the detailed plans for the Vernova turnaround.”
At the end of the fourth quarter of 2022, 59 hedge funds tracked by Insider Monkey reported owning stakes in General Electric (NYSE:GE).
Vulcan Value Partners made the following comment about General Electric Company (NYSE:GE) in its Q4 2022 investor letter:
“General Electric Company (NYSE:GE) recently spun off its health care businesses, General Electric HealthCare Technologies, which has leading market share positions in medical imaging products including MRI devices and CT scanners. General Electric’s remaining businesses include Aerospace and its Power and Renewables business. Aerospace is performing well and comprises the bulk of General Electric’s value in our opinion. We believe that the spin-off of General Electric HealthCare Technologies has highlighted the value of General Electric’s remaining business units. General Electric intends to spin out its Power and Renewables business unit early in 2024.”
2. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 63
One-Year Average Price Estimate: $300
Fremont, California-based Enphase Energy, Inc. (NASDAQ:ENPH) makes solar micro-inverters, battery energy storage, and EV charging stations. Enphase Energy, Inc. (NASDAQ:ENPH) was trading at around $200 as of March 16, while its one-year average price estimate is $300. This shows a massive upside potential from the current levels.
Earlier this month, Citi counted Enphase Energy, Inc. (NASDAQ:ENPH) among its top picks in the solar sector. The firm said in a note to investors that Enphase Energy, Inc. (NASDAQ:ENPH) is “laser focused” on customer satisfaction and is ahead of the curve when it comes to innovation. Citi also likes Enphase’s capital allocation and operating strategy.
As of the end of the fourth quarter of 2022, 63 hedge funds had stakes in Enphase Energy, Inc. (NASDAQ:ENPH). The total value of these stakes was $2.2 billion.
ClearBridge Investments made the following comment about Enphase Energy, Inc. (NASDAQ:ENPH) in its Q3 2022 investor letter:
“In IT, Enphase Energy, Inc. (NASDAQ:ENPH) delivered a strong quarter driven by secular growth in global rooftop solar, increased penetration into Europe, where demand accelerated, and a continued ramp up in battery storage sales. Also with a strong presence in the U.S., Enphase Energy designs and manufactures microinverters for residential and small commercial solar PV systems and has made strides in evolving from a solar inverter maker into a “home energy management” company that can act as the brains for the home’s energy system, including microinverters for solar, as well as storage and energy management software.”
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
One-Year Average Price Estimate: $196
With a dominant position in the EV industry, solar and other clean energy solutions for home consumers, Tesla, Inc. (NASDAQ:TSLA) is one of the best clean energy stocks to buy. Tesla, Inc. (NASDAQ:TSLA)’s one-year average price target is $196, according to Yahoo Finance. But according to CNN Business, the average price target for Tesla, Inc. (NASDAQ:TSLA) based on estimates of 36 analysts is $210. Cathie Wood, who has a $570 million stake in Tesla, Inc. (NASDAQ:TSLA), believes Tesla stock could reach $500 by 2026.
As of the end of the fourth quarter of 2022, 91 hedge funds out of the 943 funds tracked by Insider Monkey reported owning stakes in Tesla, Inc. (NASDAQ:TSLA), up from 88 hedge funds in the previous quarter.
ClearBridge Large Cap Growth Strategy made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q4 2022 investor letter:
“Tesla, Inc. (NASDAQ:TSLA), meanwhile, also fits squarely within our earnings reset group. We took advantage of its enterprise multiple falling back to historic lows to initiate a starter position in the leading manufacturer of electric vehicles (EV) and developer of battery technologies. Tesla has a significant structural cost advantage in battery production, EV manufacturing and EV selling, which gives it industry-leading operating margins in EVs. As the auto cycle has softened, the stock has sold off substantially with the rest of the automakers, despite EVs continuing to have a secular growth advantage. Tesla has a clean balance sheet with negative net debt and enormous revenue growth, EBITDA growth and free cash flow generation. Its margin buffer also gives the company the ability to cut prices while still protecting earnings better than competitors, which should help support continued volume growth. There is also significant upside optionality driven by its software offerings, which we do not believe is currently priced into the stock.
That being said, Tesla is highly indexed to a flagging auto market and we expect its earnings outlook to worsen in the near term. We are also monitoring increasing EV competition and the recently emerging risks to the brand and management integrity raised by CEO Elon Musk’s actions at Twitter to determine future position size in the portfolio.”
You can also take a peek at 15 Most Promising Dividend Stocks According to Analysts and 15 Most Promising Long-Term Stocks.
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Disclosure: None. 11 Most Promising Clean Energy Stocks According to Analysts is originally published on Insider Monkey.
