As the US stock market continues to sink deeper into bear territory, stocks that are directly involved in or connected to alternative energy have remained more resilient than most, and the sector’s favorite benchmark is truly cleaning house right now.
The alternative energy sector is comprised of companies that engage in the generation and distribution of clean and renewable energy, as well as related products and services. Alternative energy sources include solar, wind, geothermal and hydroelectric.
The sector’s favorite benchmark, iShares Global Clean Energy ETF (ICLN), is one of the better performing funds so far this year. It’s gained 12.7% in the year-to-date vs. -3.2% return by the S&P 500 Index. It’s also gained 35% over the past 12 months.
Analysts point to climate-change risk, the growing popularity of ESG investing and riding on the coattails of Tesla Inc. (NASDAQ:TSLA) stock as some of the reasons behind the newfound popularity of these stocks.
Here are five alternative energy stocks that Wall Street is swooning over:
#1 Enphase Energy Inc.
YTD Returns: 94.8%
Enphase Energy Inc. (NASDAQ:ENPH) is a Fremont, California-based company that
designs and manufactures software-driven home energy solutions that span solar generation, home energy storage and web-based monitoring and control.
ENPH stock has been on a tear, surging 40% post-earnings after its fourth quarter earnings comfortably beat Wall Street estimates with the company following it up with strong guidance. Fourth quarter revenue of $210M (+127.5% Y/Y) beat by $4.87 million while GAAP EPS of $0.88 beat by $0.62. The company generated $102.3M in cash flow from operations during the fourth quarter and exited the year with $296.1M in cash.
Enphase issued upside guidance for Q1 revenue in the $200M-210M range, including $44.5M for ITC safe harbor shipments, vs. $174M analyst consensus estimate. Meanwhile, the company sees GAAP and non-GAAP gross margins of 36-39%. Analysts were forced to raise the company’s Q1 2020 non-GAAP estimate from $0.23 per share to $0.33.
Enphase has formed a habit of easily exceeding Wall Street's earnings estimates leading to huge post-earnings rallies. Related: Major Bank Sees Abysmal Demand Growth For Oil
#2 Tesla Inc.
YTD Returns: 91.2%
Tesla Inc. (NASDAQ:TSLA) is one of the leading electric vehicle manufacturers in the world. TSLA stock has been flying ever since the company posted a surprise profit during the third quarter of 2019 and also managed to open gigafactory 3 in China in January, the company’s first manufacturing facility outside the United States. In a previous article, we also discussed how Tesla’s solar business is maturing and could one day compete with its core vehicle manufacturing business.
TSLA stock was up in triple digits YTD but has given up some gains after a report that auto deliveries in China are forecast to fall 70% in the current month and 40% for the first two months of the year due to the coronavirus outbreak. The stock has also been sliding after the National Transportation Safety Board said at a recent hearing that the company’s forward collision warning system did not provide an alert during a fatal Model X accident and its automatic emergency braking system did not activate before the crash into a highway barrier.
#3 Plug Power
YTD Returns: 52.9%
Plug Power Inc. (NASDAQ:PLUG) is a leading manufacturer of hydrogen fuel cell systems that replace conventional batteries in equipment such as forklifts and warehouse equipment.
PLUG stock has been plagued by plenty of false starts in the past after its business failed to live up to the hype. However, that seems to be firmly in the back mirror to with the shares rising to a five-and-a-half-year high after the company announced a partnership to build zero-emission commercial trucks for Colorado-based Lightning Systems, a global developer of zero-emission drivetrains. PLUG shares are up 179.1% over the past 12-month period and received a price target hike to $6 from B. Riley (25% upside) in November who believes the stock and PLUG's fuel cell technology are at an inflection point and that the company is better positioned in its core material handling business than ever before.
#4 Sunrun Inc.
YTD Returns: 52.5%
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Sunrun Inc. (NASDAQ:RUN) is a San Francisco, California-based provider of residential solar electricity. The shares have rallied nearly 30% on a report that it's joining the S&P SmallCap 600 Index. The rally, however, began well before that after J.P. Morgan initiates coverage with an Overweight rating and $19 price target saying the stock should appeal to investors seeking exposure to the de-carbonization, decentralization and digitization of energy. Related: The Real Reason The Middle East Is Pivoting Towards Renewables
JPM analyst Mark Strouse believes Sunrun is well positioned within the "high-growth" U.S. residential rooftop solar market, and its leading scale could present adjacent opportunities for growth.
#5 Bloom Energy
YTD Returns: 45.7%
Bloom Energy Corp. (NYSE:BE) (formerly Ion America) is another California-based fuel cell company that went public in 2018. Bloom Energy produces solid oxide fuel cells and power generators called Bloom Energy Servers that utilize natural gas or biogas as fuel. According to The New York Times, solid oxide fuel cells are considered the most efficient but most technologically challenging fuel-cell technology. The stock has mainly been doing well on the ESG investing trend.
BE shares, however, have come under pressure after the company revealed that it mis-stated revenue figures for 15 quarters though Cowen has come out and defended it for the apparent accounting malpractice.
By Alex Kimani for Oilprice.com
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