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.
Most Promising Clean Energy Stocks According to Analysts
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.
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.
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.
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:
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.”
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.
