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Don’t Be Fooled By Wall Street Sentiment, Clean Energy Is A Buy

Investors may be disappointed in guidance for renewable energy stocks, but the Ukraine situation has changed everything—there are tons of buying opportunities in this sector right now. 

All attention might be on crude oil as the Russian invasion of Ukraine hits day seven, but it’s a distraction that sets the stage for potential rewards for investors who take advantage of cut-rate deals on clean energy stocks. 

Take First Solar Inc (FSLR), for example. It’s fallen around 50% since November 1, 2021. 

On Tuesday alone, shares lost another 16% because investors were disappointed in guidance. FSLR missed Q4 revenue expectations, and Wall Street was expecting its full-year guidance to be $2.76 billion. Instead, FSLR set guidance between $2.4 billion and $2.6 billion. 

Most of that weak guidance has been based on what First Solar CEO Mark Widmar described as “supply chain, logistics, cost and pandemic-related challenges”. Further, Widmar said he expected those supply-chain issues to persist for 2022 earnings.

Overall, solar stocks plunged further Wednesday, with First Solar’s results dragging others down, too. 

Array Technologies Inc (NASDAQ:ARRY), a solar equipment manufacturer, had shed over 20% by 1:30pm EST Wednesday, with Canadian Solar (NASDAQ:CSIQ) down over 4%, Enphase Energy (NASDAQ:ENPH) down over 5%, and SolarEdge Technologies Inc (NASDAQ:SEDG) down similarly. 

That follows a brief rally for solar stocks in the wake of Russia’s invasion of Ukraine. 

But that rally might not be over, and this might be the perfect time to buy into cheap renewable energy stocks. 

What is happening in Ukraine is a wake-up call for a world overly dependent on fossil fuels and the geopolitics that comes along with them. While the market may be fickle enough to spark a rally one day and then shift focus entirely back to Covid-related fundamentals, the war in Ukraine has much wider-reaching implications for the energy sector. 

Wall Street’s attention will come back around to Ukraine with respect to clean energy stocks. 

Energy security risks, wildly rising desperation to diversify countries’ energy portfolios, and $100+ oil prices will drive Wall Street’s attention back where it belongs, making it a prime time to scoop up cheaper-than-ever renewable stocks. 

Europe’s desperation to create some sort of sense of energy security will override all else. 

A flurry of news releases back this up. 

Germany has just announced plans to build two new LNG terminals to reduce dependence on Russian gas. While that, in itself, does nothing for renewable energy stocks, it does indicate that an about-face on energy is about to hit Europe, and clean energy plans will be sped up with the momentum of war behind them. Carbon-reducing plans have just been injected with a brand new sense of urgency that nothing short of a war on the continent could provide. 

The suspension of the Nord Stream 2 pipeline to Germany was just the beginning–the first indicator. 

The urgency is palpable because Russia provides some 40% of Europe’s energy, and Europe imports 90% of the gas it consumes. For now, Russian deliveries have not been interrupted, but prices are soaring and sanctions could get in the way.  

Better late than never, the situation in Ukraine prompted the European Union to draft a new energy strategy that plans to significantly reduce that dependence (by 40%). Part of the plan will entail a much faster process for permitting new renewable energy projects. In addition to new gas storage rules that are expected to be unveiled next week, the EU plans to cut the bloc’s reliance on gas by 23% by 2030. 

Investors looking to get ahead of Wall Street’s day-on-day-off sentiments should be focusing on these major drivers of the clean energy sector. 

While solar stocks have just taken a beating thanks to First Solar’s guidance, wind stocks, too, surged at the start of the Russian invasion and then started sinking on Tuesday and Wednesday as Wall Street reverted to earnings reports and guidance. 

Two weeks ago, Vestas Wind Systems (OTCMKTS:VWDRY) reported a sharp drop in profits and signaled a drop in orders for wind turbines. The Russian invasion boosted them up again, only to plunge yet again as the invasion moved into its 6th and 7th days, ignoring the wider trend here. 

Likewise, VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG) dropped today on Wall Street sentiments, but over the past 5 days is trading up over 11%. 

If you missed the first buying opportunity that saw stocks like Sunrun (NYSE:RUN) gain nearly 37% since the Russian invasion began, this week’s dip on earnings and supply-chain fears presents a second-chance opportunity. 

Julianne Geiger for Oilprice.com

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Leave a comment
  • Lee James on March 02 2022 said:
    Interest in clean energy formerly stemmed from two drivers: cleaner energy and falling installed costs.

    Geopolitical considerations are going to be huge, going forward.

    It's a little ironic. Clean-energy detractors are big on citing intermittency of wind and solar. But fossil fuel has intermittency too. Fossil fuel energy is uniquely geopolitical. Here today, gone tomorrow.

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