The cleantech industry primarily includes solar, wind, biomass, hydropower, and other renewable energy sources. The sector has gained huge traction in recent years as countries across the globe are committing to reduce greenhouse gas emissions. As a result, the cleantech space has been consistently carrying out innovations to reduce costs and increase the efficiency of renewable energy.
Global leaders have been taking steps to move toward a carbon-neutral economy as climate change is becoming a major concern. Clean energy is expected to be one of the top priorities when Biden assumes office next month. The upcoming President has committed to ensuring that the American economy reaches net-zero emissions and runs on 100% clean energy by 2050. Consequently, the global clean energy technologies market is estimated to reach $452.8 billion by 2027, growing at a CAGR of 6.9% starting from 2020.
As a result, stock markets are significantly rewarding cleantech stocks lately. This is evident from the 36.7% gain by the Invesco Cleantech ETF (PZD) in the past six months, compared to SPDR S&P 500 ETF Trust’s (SPY) 17.5% return in the same period.
The exponential increase in demand for clean energy as an alternative source brings immense growth opportunities for the industry. Hence, companies like Tesla, Inc. (TSLA), Brookfield Renewable Partners (BEP), Bloom Energy Corporation (BE), and SunPower Corporation (SPWR) that are leaders in the cleantech space should continue to gain.
Tesla, Inc. (TSLA)
TSLA designs, develops, manufactures, and sells electric vehicles, electric vehicle powertrain components, and stationary energy storage systems in the United States, China, and internationally. It is the world’s only fully integrated sustainable energy company. The California based company has over 143 locations across the United States and operates through the following segments – Automotive, Energy Generation, and Storage.
The long-awaited addition of TSLA shares to the S&P 500 will take place on December 21st, 2020, “all at once” in two tranches to ease integration. The company announced a new style of battery cell during its Battery Day held in September, allowing it to produce cells that are more energy-dense, safer, and reduce costs. Moreover, TSLA Energy is experiencing unprecedented growth for its new solar rental service for homeowners, essentially due to cheap solar subscriptions.
TSLA reported a top-line of $8.7 billion in the third quarter, growing 39% year-over-year, primarily driven by substantial growth in vehicle deliveries. The energy generation and storage segment generated $579 million in revenue, rising 44% year-over-year as the business reached record deployments of 759 MWh, compared to a quarter-ago value of 419 MWh. Total solar deployments increased 33% year-over-year to 57 MW in the last reported quarter. Moreover, the solar roof deployments almost tripled sequentially. Non-GAAP EPS came in at $0.76, more than doubling year-over-year.
TSLA’s Powerwall, a home battery designed to store energy from solar or the grid, is witnessing strong and growing demand. Apart from capacity expansion, TSLA is implementing more ambitious architectural changes to its products and factories to improve manufacturing cost and efficiency. Analysts, thus, expect the current quarter and current year EPS to rise 112% and 5,500%, respectively.
TSLA closed yesterday’s trading session at $593.38, gaining 609.2% year-to-date. The stock is up 236% in the past six months and is currently trading just 2.4% below its 52-week high of $607.80.
How does TSLA stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #1 out of 34 in the Auto & Vehicle Manufacturers industry.
Brookfield Renewable Partners LP (BEP)
BEP is a market leader that owns a range of renewable power generating facilities with a global presence in over 30 countries. The company generates electricity through hydroelectric, wind, solar, cogeneration, and biomass sources. Its portfolio consists of approximately 19,000 megawatts of installed capacity. BEP operates through the following segments – Hydroelectric, Wind, Solar and Storage, and Corporate.
BEP entered into a five-year energy agreement with JP Morgan Chase (JPM) in October, to supply clean, renewable electricity to over 500 of the latter's real estate operations in New York State. Moreover, the company agreed with Plug Power (PLUG), a leading provider of hydrogen engines and fueling solutions, to fully power 10 tons of 100% green liquid hydrogen per day, to facilitate PLUG’s production.
For the third quarter that ended September 2020, BEP’s actual generation increased 8.3% year-over-year to 12,007 GWh. While revenues from the solar segment increased 114.3% to $120 million, revenues from the wind segment increased 17.4% year-over-year to $101 million. The company reported funds from operation (FFO) of $0.38 per share, rising 11.7% compared to the year-ago value of $0.34 per share.
BEP remains focused on growing its business while continuing to deliver on its target of 12% to 15% long-term returns to equity holders. The company aims to leverage its scale and operational expertise to help governments and businesses around the world transition to a greener future. Hence, analysts expect FFO to grow at a rate of 53.3% per annum over the next five years.
With a year-to-date gain of 60.8%, BEP closed yesterday’s trading session at $59.94. The stock is up nearly 54% in the past six months and is presently trading just 7.7% below its 52-week high of $64.94.
BEP’s strong fundamentals are reflected in its POWR Rating, it has a “Buy” rating with an “A” in Trade Grade and Peer Grade, and a “B” in Buy & Hold Grade. Within the MLPs – Other industry, it is ranked #3 out of 18 stocks.
Bloom Energy Corporation (BE)
BE manufactures solid-oxide fuel cell systems for on-site power generation. It offers Bloom Energy Server, a stationary power generation platform that converts standard low-pressure natural gas or hydrogen into electricity through an electrochemical process without combustion. BE provides on-site power, utility, and grid support and primarily generates revenue through electricity, service, installation, and product streams.
BE, along with SK Engineering and Construction (SK E&C), has recently won a competitive Request for Proposal (RFP) to supply solid-oxide fuel cells (SOFC) powered by 100% hydrogen and electrolyzers to an industrial complex in Changwon, Korea. The company will supply 1.8 megawatts of hydrogen-powered fuel cells through a multi-stage deployment from next year. Moreover, the company powered on two new clean energy facilities with fuel cell technology in the Gyeonggi province of South Korea in September this year.
In the last reported third quarter, BE delivered a 6.6% sequential increase in its total revenue to $200.3 million. However, this implied a 14% year-over-year decline. Adjusted EBITDA increased 1,219% sequentially to $27.7 million, while acceptances increased 2.6% from the prior quarter to 314. However, the company is not profitable yet and reported a net loss of $12 million.
BE has been making some aggressive moves in creating a “hydrogen infrastructure.” The cost of creating hydrogen fuel cells has significantly come down due to advances in technology and its platform is now well-positioned for a variety of applications. Hence, analysts expect the current quarter and current year EPS to rise by 92.9% and 37.9%, respectively.
BE closed yesterday’s trading session at $24.20, with a year-to-date return of 224%. Moreover, the stock has gained 211.5% in the past six months and is presently trading just 12.8% below its 52-week high of $28.24.
BE’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” rating with an “A” in Trade Grade, and a “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. Among the 59 stocks in the Industrial – Equipment group, it’s ranked #27.
SunPower Corporation (SPWR)
SPWR is a leading manufacturer and designer of technologically advanced solar panels and systems. It also operates in the direct sale of turn-key engineering, procurement, The expected, and construction. The company delivers solar systems to residential, commercial, and utility-scale power plant customers worldwide. It primarily operates through two segments – SPWR Energy Services and SPWR Technologies.
SPWR has recently extended its operations to China in light of its go green initiative raising the demand for solar power. The company signed a manufacturing and services contract worth RMB480 million with China Huanqiu Contract & Engineering Corporation, a subsidiary of China National Petroleum Corporation. Moreover, the company secured financing commitments in September this year from Hannon Armstrong Sustainable Infrastructure Capital (HASI) for its residential solar lease business as well as its new solar plus storage program.
For the third quarter ended September 2020, SPWR reported revenue of $274.8 million, growing 26.2% sequentially. The company recognized 108 MW during the quarter, improving 33% compared to 91 MW in the second quarter. SPWR added 10,000 customers to its residential strength and sealed more than 275 MW project contracts for commercial and industrial power solutions during the period. The company, thus, reported a loss of $0.04 per share, significantly improving from the quarter-ago loss of $0.10 per share.
To boost its sales among retail customers, SPWR introduced low low-annual percentage rate loans for residential solar customers in September. By extensively lowering the financing costs, SPWR should witness a rising demand for its domestic solar products usage. Moreover, the company closed a new residential solar plus storage financing facility in the last quarter to drive substantially better economics. Hence, analysts expect current year EPS to rise 34.5% and surge 326.3% next year.
SPWR closed yesterday’s trading session at $20.69, with a year-to-date gain of 305.1%. The stock is up more than 80% in the last three months and is presently trading 15.2% below its 52-week high of $24.40.
SPWR’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” rating with an “A” in Trade Grade and a “B” for Peer Grade. Among the 19 stocks in the Solar industry, it’s ranked #5.
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TSLA shares were trading at $595.64 per share on Friday afternoon, up $2.26 (+0.38%). Year-to-date, TSLA has gained 611.93%, versus a 16.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.4 Top Cleantech Stocks to Buy in December appeared first on StockNews.com