4 Clean Energy Stocks Set To Outperform Says Evercore ISI
(Image courtesy Mohamed Hassan / Pixabay.)
With Earth Day just around the proverbial corner, analysts at Evercore ISI initiated affirmative coverage on four clean energy stocks.
Plug Power Inc. (PLUG): Analyst James West initiated coverage at Outperform with a price target of $42; its current price is $27.24.
Headquartered in Latham, New York, Plug Power is a supplier of hydrogen fuel cell solutions designed to replace conventional batteries in electric-powered equipment and vehicles.
West predicted a strong future for the company, writing that hydrogen will become “more commercially viable between now and 2030 while H2’s greater potential should unfold after 2030. This sanguine, long-term view should allow PLUG to achieve 3-4% share in a +$250B market in 2030.”
Furthermore, West forecast new commercial opportunities for Plug Power later in the year that would enable its expansion into adjacent markets and the securing of partnerships or joint ventures with other companies.
Despite what West described as the “pending restatement of the company’s previously reported financials and a non-cash charge” along with the challenge from rival technologies including lithium-ion batteries, West defined Plug Power as a “strong company with a defensible and growing business with long-term franchise value.”
Enphase Energy Inc. (ENPH): West initiated coverage at Outperform and a $184 price target; its current price is $150.01.
Fremont, California-headquartered Enphase is a provider of home energy solutions for the solar photovoltaic industry. West noted the company’s “dominant position in the U.S. residential microinverter market” as a crucial component in its performance, adding the company is successfully meeting the needs of its sector.
“ENPH is evolving from purely selling hardware to providing more recurring services and streamlining the installation process, thereby increasing its revenue potential per home,” West wrote. “The company stands out in the clean tech world as it already has strong margins and generates positive free cash flow.”
West raised a light-red flag on potential risks regarding the company’s ability to deploy new products, its effort to penetrate the U.S. small commercial property market, and whether an uptick in interest rates will discourage homeowners seeking to finance solar installations. He also cautioned the company’s planned international expansion by pointing out “the extremely fragmented nature of the European market.”
Still, West acknowledged the company has already made an impact, noting it has shipped more than 32 million of its microinverters and deployed 1.4 million of its systems in more than 130 countries.
Sunrun Inc. (RUN): West initiated coverage at Outperform and an $87 price target; its current price is $52.16.
West pegged San Francisco-headquartered Sunrun as “the clear U.S. residential solar market leader and as such enjoys scale advantages in a massively underpenetrated market.” He pointed out the company’s $4.2 billion in 2020 net earning assets, adding its’ 550,000 customers will allow the company to “upsell and cross-sell opportunities.”
West admitted there were risks to consider: a market shift from leasing solar systems to ownership, a slower than anticipated movement away from traditional energy sourcing to clean tech solutions, competition in the sector, inflation’s effect on equipment and installation costs, and the impact that higher interest rates would have on financing solar installations and on the wider capital markets.
But West was not convinced that interest rate risk would be detrimental to its continued performance, observing that the company “has access to cheap project financing and utility rates will also rise incentivizing customers to still look at solar.”
Sunnova Energy International Inc. (NOVA): Analyst Sean Morgan initiated coverage at Outperform with a price target of $52; its current price is $38.
Houston-based Sunnova provides solar and energy storage services in the U.S. residential market, which Morgan identified as accounting for roughly 3% of the nation’s 84 million single-family homes.
Morgan praised the company’s service offerings, pointing out that most of its customers “are contracted with durations spanning more than 15 years, with many power purchase agreements, loans, and leases with 25-year tenors. This dynamic should drive increasing profitability, along with a larger and more stable base of cash flows, as the company matures.”
The company’s biggest risks, Morgan added, would be a “reversal of the clean energy-friendly federal and state tax and energy policies, such as solar tax abatements and favorable net metering.” As with West’s analyses, Morgan raised concern on what higher interest rates could create in this sector.
But on the positive side, Morgan highlighted that increased battery power storage rates will strengthen its relations with new and current customers while an expansion into other services, including electric vehicle charging, would further strengthen its position in the market.
Disclaimer: © 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
The charts would seem to disagree!
That's the point. Technical analysis has gone to sh*t. It's been nearly impossible to work on t/a, especially after the #gamestop saga
I don't agree, my TA is usually pretty good. You obviously can't predict everything especially because things can suddenly change, but you can definitely have a higher probability in winning.
Looking at the multi year charts for some of these solar stocks it's very apparent that they go through popularity cycles of bubbles and I have no good reason to expect any different this time because they are already popping. Until I see some solid support there's nothing. I get that we all want to believe that we're finally taking clean energy more seriously but the charts and price action do not lie no matter how we twist it in our minds.
T/A should make up about 5% of overall trading. I've seen so many bullish patterns breakdown and so many bearish patterns go full bull. T/a that's validated by fundamentals can be helpful. But in terms of using it to make investment decisions, it comes after the fact that everything else is done.
https://www.youtube.com/watch?v=EWZHlenQzc8
In saying that, we look at solar and where the market is with it right now and then we look at the chart.
Essentially, by saying this isn't the turning point, we're saying a play like
$RUN, from a t/a standpoint, could drop to as low as $20.
That said, do the fundamentals match that analysis? How about all the analysts whom are putting their reputation on the line? Does the POTUS back oil or clean energy? Is the risk to reward here beginning to favor longs?
Anything is possible, but based on all this information, this appears to be a valid point for longs to enter into the solar sector.
I'm actually holding $RUN and $NOVA shares that I just picked up, I'm probably going to get destroyed tomorrow for doing so. So I'm a little bitter.
Do we not think though that this could be the new bottom? You're right. At this point, we're guessing the bottom but also utilizing info to do so. Until we see a longer consolidation phase, we don't know for certain. And even then, still no guarantee.
@[Barry Glassman](user:91901), I agree with Warren. Do you think you're putting too much weight on t/a?
Maybe. The broad market looks about ready to go through a correction or at least some sort of pullback and that is going to drag these solar stocks down a lot. Maybe to the point at which they are safe long term buys.
That's a fair assessment. I believe that TA as it stands right now, is out to trick the retail trader from their money. I believe algos are being purposely designed to screw us over, now more than ever.
One simple example:
charts.stocktwits.com/.../original_318835958.jpg
There are many more and further, better examples out there. You could very well be right as well. The next few days and next week should hopefully be telling.
I do see a lot of trickery but I'm getting used to what to look for. I'm not sure what is wrong on that chart, that is a hanging man candle at the top of a run up which is bearish and there's a big red candle after it which is what one would expect.
This is what happened after that bearish pattern:
charts.stocktwits.com/.../original_318848860.jpg
This is the point I'm making on t/a. It's trash, in the sense that a big buyer, big seller, manipulation, and algos are designed to trick retail traders like mad.
Ah, but that doesn't indicate a long term drop, just that there is going to be some drop. If you look at the macd on your photo you can see that the average and signal lines are still above the histogram during that move which means the stock is still in an uptrend for whatever timeframe you are looking at.
From a t/a perspective right now, what are you seeing in $RUN? If you wouldn't mind sharing a rundown?
I know what I see. I see bearish weekly candle. RSI that has only gone lower than this at beginning of pandemic and is historically at a support level. And macd looking to change directions positive. Golden cross on moving averages should form soon. I'm using weekly chart and analyzing $RUN.
charts.stocktwits.com/.../original_318853881.jpg
Better rsi picture:
charts.stocktwits.com/.../original_318854111.jpg
Sure. I actually just bought $RUN and $NOVA. Though looking at the broad market and futures, and after hours activity I'm deeply regretting it and mentally preparing myself for losing hundreds of dollars tomorrow.
$RUN has fallen below all of the major moving averages on the daily chart and as of today we have a death cross on the daily chart (50ma just touched the 200ma). On the weekly chart it fell below the 50ma (it's actually the only major solar stock that has), and on the monthly chart it looks to be falling towards the 20ma on that chart. If you do a fib. retracement of the bubble that formed over 2020, it looks like we are heading towards the 61.8% mark which is roughly $43. I see it heading there next, which means I better get out tomorrow otherwise I'll be down in the thousands.
I could be wrong of course, but I don't see any good indications and I am going to regret holding onto these shares when the morning comes and I'm down $500 or more.
charts.stocktwits.com/.../original_318856470.png
Thank you for allowing me to revisit t/a. I've watched a video and brought back some memories to the basics. It's much appreciated. I agree that the close below the 100 and 200 moving average is a bad sign.
That said, we have a few things going for us. This area is a key level of support. If this area breaks, then you're right, we're in for some problems.
If we look at the 4 hour chart, which I'll display next screen, we actually see some pretty heavy volume come in at 46.21 on the rise to 53.40. The dip after returns, but this time, to 47.02 making a higher low.
I'm going to look into options and short interest but as long as we hold these levels, a reversal could be in store. I agree with your analysis and the smart thing to do here for both of us, would've been to await further validation, but to me, many people likely already entered on that 4- hour candle.
An attempt reversal also appeared between March and April.
charts.stocktwits.com/.../original_318888269.jpg
Pictured is a 4 hour chart showing buying demand at 46.21 then a retracement that dipped to 47.02 / a higher low (retracement happened after the spike off the low).
charts.stocktwits.com/.../original_318888656.jpg
Solar ETF also provides insight:
charts.stocktwits.com/.../original_318896464.jpg
Great work and conversation. I like that you're not offended, defensive, or any nonsense. Willing to discuss. Nice to meet you, brother.
Same here!