Be Wary Of These 3 Overvalued Clean Energy Stocks

solar panels on green field

Climate change concerns have made many governments pledge carbon neutrality by 2050. Lured by the potential growth in the clean energy industry, the space has now become overcrowded with the entry of several new players. Because the equity market is currently experiencing a pullback, clean energy stocks that have rallied based solely on investors’ optimism are expected to witness a sell-off. Hence, we think NextEra Energy (NEE), SolarEdge Technologies (SEDG), and Bloom Energy (BE) are best avoided now.

Clean energy stocks have gained significantly over the past year as most governments across the world have announced initiatives to reduce carbon emissions. Renewable energy is expected to become the next ‘big thing’ in the energy sector as countries upgrade their existing infrastructure and industries to make them carbon neutral.

Many governments have announced  plans on decarbonization, with some seeking to achieve net zero emissions by 2050. This has  induced investors to invest heavily in the clean energy space. To capitalize on the nascent sector,  many new companies have entered the clean energy industry without  product pipelines or  financial strength. As a result, many analysts believe the clean energy industry has entered a bubble.

The recent pullback in equities has caused some clean energy stocks to decline. With  fiscal stimulus spending threatening to exacerbate inflationary pressures and bond yields in an uptrend, the clean energy industry bubble may well burst soon.

Thus, we think it best to avoid overvalued clean energy stocks such as NextEra Energy, Inc. (NEE - Get Rating), SolarEdge Technologies, Inc. (SEDG - Get Rating) and Bloom Energy Corporation (BE - Get Rating) that are susceptible to deeper pullbacks.

NextEra Energy, Inc. (NEE - Get Rating)

Headquartered in Juno Beach, Florida, NEE, through its subsidiaries, generates, transmits, distributes and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear and fossil fuel such as coal and natural gas facilities. NEE mainly operates through two segments — Florida Power & Light Company (FPL) and NextEra Energy Resources, LLC (NEER).

In February, NEE was  recognized as one of the World’s Most Ethical Companies for the 14th time by Ethisphere Institute. The company announced the appointment of Lynn M. Utter to its board of directors on February 12. On the same date, NEE’s board of directors  declared a regular quarterly common stock dividend of $0.39 per share. In January,  First Student, Inc., First Transit, Inc., and NEER entered  a framework agreement and announced that they are working towards a joint venture to pursue the electrification of tens of thousands of school and public transportation vehicles across the U.S. and Canada.

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