Analysts love these green energy stocks.
Investors have been preparing for the green energy revolution for years. In the 2010s, global emissions and fossil fuel usage continued to increase. However, a combination of weather intensification, global policy changes, consumer behavioral shifts and cheaper clean energy technology will make the 2020s a turning point for green energy, according to a new report on climate change by Bank of America. The Bank of America analyst team recently took a deep dive into U.S. renewable energy and electric vehicles to identify the top green stocks for long-term investors. Here are nine of their top clean energy stock picks.
NextEra Energy (ticker: NEE)
NextEra Energy is the parent company of Florida Power & Light, Gulf Power and NextEra Energy Resources. Analyst Julien Dumoulin-Smith says NextEra is the top U.S. renewable energy utility stock to buy. He says NextEra has plenty of bullish catalysts ahead, including strong execution of its utilities business, development of its renewable segment, tailwinds from U.S. federal investments and potential opportunities in hydrogen. NextEra expects to add between 23 gigawatts and 30 gigawatts of new renewable capacity through 2024. Bank of America has a “buy” rating and a $93 price target for NEE stock.
Enphase Energy (ENPH)
Enphase Energy develops and sells solar photovoltaic home energy solutions. Analyst Aric Li says Enphase is a top-tier play on solar modules and inverters. He is projecting 72.6% revenue growth in 2021 and 83.6% revenue growth in 2022 and says the company’s impressive growth outlook is not fully priced into the stock at current levels. Li says bullish near-term catalysts include storage growth, favorable policy headlines and solid core solar momentum. He says Enphase shares have room for additional earnings multiple expansion. Bank of America has a “buy” rating and a $255 price target for ENPH stock.
SunRun designs, sells and installs residential solar energy systems in the U.S. Dumoulin-Smith says SunRun is a top stock pick in the residential solar group. He says the stock should benefit from several bullish developments in 2021, including favorable Biden administration policy measures, the potential to refinance existing systems on a large scale, the opportunity to upsell additional services to its growing pool of customers and the ability to expand the company’s grid services and extend its residential solar lead over competitors. Bank of America has a “buy” rating and a $95 price target for RUN stock.
Sunnova Energy (NOVA)
Sunnova Energy is a top provider of residential solar and energy services. Dumoulin-Smith says Sunnova is also among his top solar stock picks due to its leading position as a solar service provider. He says Sunnova has significant long-term upside relative to most of its solar stock peers given its current valuation and underlying asset value. Sunnova should also benefit from the perfect storm of accommodative federal policies, outsized sales growth and the opportunity to upsell its large and growing customer base. Bank of America has a “buy” rating and a $52 price target for NOVA stock.
Ormat Technologies (ORA)
Ormat Technologies is a leading geothermal and recovered energy power company operating in the U.S., Indonesia, Kenya, Turkey and several other countries around the world. Dumoulin-Smith is bullish on Ormat and likes the company’s exposure to both geothermal energy and solar energy storage. He says the stock has tremendous long-term potential given its growth outlook and its earnings upside. Dumoulin-Smith says Ormat has an impressive development pipeline and plenty of liquidity to invest in accelerating its battery storage growth and expanding its international presence. Bank of America has a “buy” rating and a $125 price target for ORA stock.
General Motors (GM)
Investors have been piling into electric vehicle stocks in recent years. Analyst John Murphy says General Motors is a top EV stock pick and the best way to play the transition of the legacy auto industry to next-generation green technology. GM recently reported fourth-quarter earnings and revenue beats, but Murphy says the biggest takeaway from the report is GM’s commitment to both electrification and autonomy. While many EV stocks have valuations in the stratosphere, GM shares trade at just nine times forward earnings. Bank of America has a “buy” rating and a $72 price target for GM stock.
NIO is a leading manufacturer of premium EVs in China. The company has been one of the hottest stocks in the market, gaining more than 1,800% in the past 18 months. In January, NIO reported 352% vehicle delivery growth over the previous year, and analyst Ming Hsun Lee says that delivery growth momentum will likely continue throughout the first half of 2021. Lee is bullish on NIO’s margin growth opportunities, its focus on autonomous powertrain technology, its sales channel expansion and its impressive pipeline of upcoming vehicle launches. Bank of America has a “buy” rating and a $70 price target for NIO stock.
While NIO is the leader in the Chinese premium EV market, Lee says XPeng is the leader in the Chinese smart EV market. As impressive as NIO’s January delivery numbers were, XPeng’s 470% year-over-year growth outpaced even NIO. XPeng’s focus on autonomy sets it apart from peers, and Lee is projecting 59% compound annual revenue growth through 2025. Lee says XPeng’s focus on over-the-air software updates, coupled with the rollout of new models in coming years, will be a powerful sales growth driver. Bank of America has a “buy” rating and a $54.10 price target for XPEV stock.
Li Auto (LI)
Li Auto is another leading Chinese smart EV maker, and Lee says the company’s focus on extended-range EVs sets it apart from its peers. Like its competitors NIO and XPeng, Li reported robust delivery growth in January, at 356%. Li also recently announced a new EV technology research and development center in Shanghai that will focus on high-voltage platforms, ultra-fast charging technology and autonomous and intelligent systems. Lee is projecting 48% CAGR through 2025 and says Li’s extended-range EVs help comfort drivers’ EV range anxiety. Bank of America has a “buy” rating and a $42 price target for LI stock.
Best green stocks to buy:
— NextEra Energy (NEE)
— Enphase Energy (ENPH)
— SunRun (RUN)
— Sunnova Energy (NOVA)
— Ormat Technologies (ORA)
— General Motors (GM)
— NIO (NIO)
— XPeng (XPEV)
— Li Auto (LI)
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