Climate change remains a polarizing political issue. However, as an investor, it’s a debate that bears watching. And that’s not just the case for environmental, social, and governance (ESG) investors. Every investor that’s looking to profit from the current $3.5 trillion infrastructure bill needs to pay attention to the current debate about climate change.
That’s because right now the business of climate change is beginning to catch up to the emotion. And that makes it a good time to invest in the clean energy sector. This includes solar and wind stocks. But it also includes other related sectors such as electric vehicle charging and other renewable energy sources such as renewable natural gas (RNG).
That’s the topic of this special presentation which looks at 7 clean energy stocks that look like strong buys as the Biden administration looks to pass its sweeping infrastructure bill.
Investors need to be able to skate to where the puck is moving. For years, climate change initiatives have been bogged down by the reality that the technology was not ready to meet the moment. That is rapidly becoming a non-issue. And that makes this sector one that investors can’t afford to ignore.
Quick Links
- Clean Energy Fuels Corporation
- NextEra Energy
- Sunrun
- Canadian Solar
- Daqo New Energy
- Enphase Energy
- Brookfield Renewable Partners
#1 - Clean Energy Fuels Corporation (NASDAQ:CLNE)
The first of the clean energy stocks on our list is the appropriately named Clean Energy Fuels Corporation (NASDAQ: CLNE). Many investors may have noticed that many of the electric vehicle (EV) companies that went public in 2020 are focusing on the commercial transportation sector. That’s because many companies have made pledges to power their fleets with a clean, low-carbon fuel.
Clean Energy Fuels is one of the largest providers of clean fuel for this growing market. Specifically, the company is engaged in the development and delivery of renewable natural gas (RNG). One benefit that is becoming apparent to fleet operators is that RNG can be used in combination with natural gas to create a clean, cost-effective alternative to diesel fuel.
And one of the more intriguing reasons to invest in CLNE stock is that in addition to delivering the fuel, they operate a growing network of fueling stations across the United States and Canada.
CLNE stock first caught the attention of retail investors after the 2020 election. It got caught up in the meme stock movement and soared 614% to a closing price of $17.29 on February 12, 2021. The stock has since dropped over 50% but analysts still suggest the stock has a 12-month upside of over 80%.
About Clean Energy Fuels
Clean Energy Fuels Corp. provides natural gas as alternative fuels for vehicle fleets and related fueling solutions in the United States and Canada. It supplies renewable natural gas (RNG), compressed natural gas (CNG), and liquefied natural gas (LNG) for medium and heavy-duty vehicles; and offers operation and maintenance services for public and private vehicle fleet customer stations.
Read More - Current Price
- $2.56
- Consensus Rating
- Buy
- Ratings Breakdown
- 4 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $5.38 (110.0% Upside)
#2 - NextEra Energy (NYSE:NEE)
As the economy begins to reopen, it’s becoming clear that traditional fossil fuels aren’t going extinct anytime soon. In fact, the growth in oil stocks is proof that a “both/and” approach will be necessary. That’s the kind of optionality you’re investing in with NextEra Energy (NYSE: NEE).
NextEra is first and foremost a traditional utility company. It owns power plants fueled by natural gas, nuclear energy, and oil. And when it comes to utility companies, location matters. In the case of NextEra, it supplies power to 50% of the homes in Florida. That’s one reason it’s the largest electric utility in the United States.
However, NextEra has a portfolio of wind turbines and solar panels that make it the world’s largest generator of renewable energy.
Over the last five years, NEE stock has generated an impressive 161% gain. The stock stumbled a bit after a four-for-one stock split in October 2020. In fact, as late as June, the stock was negative for the year, but it is surging in the past 60 days and is now up 16% for the year.
About NextEra Energy
NextEra Energy, Inc, 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,natural gas, and other clean energy. It also develops, constructs, and operates long-term contracted assets that consists of clean energy solutions, such as renewable generation facilities, battery storage projects, and electric transmission facilities; sells energy commodities; and owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.
Read More - Current Price
- $71.67
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $87.15 (21.6% Upside)
#3 - Sunrun (NASDAQ:RUN)
Solar energy has been one of the hottest subsectors in the renewable energy sector. And investors looking to invest in a best-in-class solar company need look no further than Sunrun (NASDAQ: RUN).
In June, Morgan Stanley (NYSE: MS) called Sunrun “the most compelling clean energy stock.” At the time, it raised its price target for RUN stock from $86 to $91. And although the company had a disappointing earnings report in August, only one analyst has issued a lower price target as of this writing.
That may be because analysts understood that Sunrun is caught in the middle of the infrastructure battle that now looks to have been resolved. With that in the rearview mirror, the company looks to benefit from government subsidies for solar panel installations.
Plus the company is active in the growing EV charging field. Sunrun is now the preferred installer for the Ford Motor Company’s (NYSE: F) F-150 EV pickup truck.
About Sunrun
Sunrun Inc designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels and racking; and solar leads generated to customers. In addition, the company offers battery storage along with solar energy systems; and sells services to commercial developers through multi-family and new homes.
Read More - Current Price
- $9.87
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $19.21 (94.7% Upside)
#4 - Canadian Solar (NASDAQ:CSIQ)
Sticking with solar stocks, investors can turn their attention north of the U.S. border and consider an investment in Canadian Solar (NASDAQ: CSIQ). Like Sunrun, Canadian Solar is a pure-play on the solar sector. And like Sunrun, the stock has been beset by the hot and cold attention paid to renewable energy stocks.
The company is one of the world’s largest manufacturers of all things solar. But it also provides advanced energy storage solutions. For example, the company has partnered with Habitat Energy to utilized Habitat’s AI-enabled battery optimization and dispatch services.
Canadian Solar released its second-quarter earnings on August 12, 2021, and it pleased investors. Not only did revenue increase to 1.43 billion. The 105% year-over-year increase fell comfortably in the range of $1.4 billion to $1.5 billion forecast by analysts.
And in terms of gross margin and net income, the story was even better. After an initial dip in after-hours trading, the stock turned positive. That is in line with the opinion of analysts who are forecasting CSIQ stock to have a 12-month price target of $54 which would be a gain of nearly 30% (29.81%) from the stock’s current level.
About Canadian Solar
Canadian Solar Inc, together with its subsidiaries, provides solar energy and battery energy storage products and solutions in in Asia, the Americas, Europe, and internationally. The company operates through two segments, CSI Solar and Recurrent Energy. The CSI Solar segment designs, develops, and manufactures solar ingots, wafers, cells, modules, and other solar power and battery storage products.
Read More - Current Price
- $11.50
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 2 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $18.58 (61.6% Upside)
#5 - Daqo New Energy (NYSE:DQ)
Another international company to make the list is Daqo New Energy (NYSE: DQ). The Chinese company manufactures the monocrystalline silicon and polysilicon that is used in solar panel production. Like several of the stocks on this list, Daqo stock is down on the year. Being a Chinese company there may be many reasons for that dip. But certainly, the delay of the infrastructure bill is weighing on all solar stocks.
However, one of the best ways to assess a company’s short-term fortunes is to look at what the analysts have to say. And analysts are bullish on DQ stock. The consensus opinion of analysts is for the stock to climb to $88.92; that’s a gain of over 50% from its current price.
And with the company due to report earnings in mid-August, that could be revised upwards. At that time, the company is expected to post earnings of $3.29 on revenue of $389.15 million. That would be a revenue increase of over 100% from the prior-year quarter.
About Daqo New Energy
Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufacturers in the People's Republic of China. Its products are used in ingots, wafers, cells, and modules for solar power solutions. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp.
Read More - Current Price
- $17.51
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.26 (27.1% Upside)
#6 - Enphase Energy (NASDAQ:ENPH)
Enphase Energy (NASDAQ: ENPH) offers a different way to play the solar sector. The company is the world’s leading supplier of photovoltaic solar home energy solutions. As part of the renewable energy bubble of late 2020, ENPH stock soared over 100% between Election Day and the middle of January.
The stock is down about 10% since then but has rallied 4% since delivering strong quarterly earnings in July. For the quarter the company beat on both the top and bottom lines. Enphase’s quarterly revenue of $311.23 million was 5% higher than the prior quarter and approximately 150% higher than the same quarter in 2020. And the company told analysts that it was forecasting a 9% sequential increase in revenue for the next quarter.
In addition to the opportunity that exists within the United States, investors can be excited about the company’s first expansion into an international market. Enphase launched its Encharge battery storage system in June which is serving as an additional catalyst for the stock.
About Enphase Energy
Enphase Energy, Inc, together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level and combines with its proprietary networking and software technologies to provide energy monitoring and control.
Read More - Current Price
- $71.45
- Consensus Rating
- Hold
- Ratings Breakdown
- 14 Buy Ratings, 15 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $100.33 (40.4% Upside)
#7 - Brookfield Renewable Partners (NYSE:BEP)
The last, but certainly not the least of the clean energy stocks to consider is that of Brookfield Renewable Partners (NYSE: BEP). Brookfield is one of the largest clean energy companies in the world, having a hand in every major renewable energy sector. At this time, approximately 62% of the company’s portfolio is in the area of hydroelectric power (they have over 200 power plants). However, the company also operates wind farms (approximately 100) and solar facilities (over 550). This combination allows Brookfield to generate 21 gigawatts of power with an additional 27 gigawatts as part of its development pipeline.
BEP stock is up 29% in the last 12 months, but it has underperformed the market in 2021. As of this writing, the stock is down 12%. However, since the company’s debut in December 2017, the stock is up 122%.
And Brookfield is a favorite of income investors because the company pays out approximately 95% of its earnings as a dividend. The company has grown the dividend 16% in the last three years.
About Brookfield Renewable Partners
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, and Brazil. The company generates electricity through hydroelectric, wind, solar, distributed generation, and pumped storage, as well as renewable natural gas, carbon capture and storage, recycling, cogeneration biomass, nuclear services, and power transformation.
Read More - Current Price
- $22.95
- Consensus Rating
- Buy
- Ratings Breakdown
- 8 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.78 (38.5% Upside)
There is a saying that change happens slowly, then all at once. That is an apt analogy to what is going on in the clean energy sector. For years, many companies have been diligently working to create technologies that can make clean energy solutions a viable alternative to traditional fossil fuels.
The industry may not be there quite yet, but it’s much closer than it has ever been. And the sector has strong support from the majority party in the United States. This means that it’s time for investors to look closely at the role that clean energy stocks can play in your portfolio.
Investors who may be concerned about putting all their eggs in one or two baskets may consider investing in one of the many clean energy exchange-traded funds (ETFs) that are available. Many of these ETFs are tailored to specific niches within the sector giving you different ways to invest based on the areas you may believe or most profitable, or those that you feel most passionately about.
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