5 Best Alternative Energy Stocks To Buy Now

In this article, we discuss 5 best alternative energy stocks to buy now. If you want to see more stocks in this selection, check out 12 Best Alternative Energy Stocks To Buy Now. 

5. First Solar, Inc. (NASDAQ:FSLR)

Number of Hedge Fund Holders: 26

First Solar, Inc. (NASDAQ:FSLR) is an Arizona-based company that provides photovoltaic solar energy solutions in the United States, Japan, France, Canada, India, Australia, and internationally. First Solar, Inc. (NASDAQ:FSLR) is one of the best clean energy stocks to invest in. On November 7, KeyBanc analyst Sophie Karp raised the price target on First Solar, Inc. (NASDAQ:FSLR) to $175 from $145 and maintained an Overweight rating on the shares. The analyst updated her estimates to completely reflect the impact of AMC on First Solar, Inc. (NASDAQ:FSLR)’s earnings in 2023 and beyond and to properly account for the value of tax credits the company is eligible for. 

According to the second quarter database of Insider Monkey, 26 hedge funds were long First Solar, Inc. (NASDAQ:FSLR), compared to 35 funds in the preceding quarter. D E Shaw is a significant stakeholder of the company, with 1 million shares worth $68.7 million.  

Here is what White Brook Capital had to say about First Solar, Inc. (NASDAQ:FSLR) in its Q1 2021 investor letter:

“First Solar (FSLR) and Itron (ITRI), both of which I’ve written about in past In Focus sections, were long-term positions that were sold as their prices exceeded price targets. Both are solid companies that remain on my watchlist, but the opportunity cost of not investing in other potential investments exceeded their potential mid-term returns.”

4. Sunrun Inc. (NASDAQ:RUN)

Number of Hedge Fund Holders: 36

Sunrun Inc. (NASDAQ:RUN) is a California-based company that designs, develops, installs, and maintains residential solar energy systems in the United States. On November 2, Sunrun Inc. (NASDAQ:RUN) reported a Q3 GAAP EPS of $0.96 and a revenue of $631.91 million, exceeding Wall Street estimates by $1.01 and $63.28 million, respectively. The revenue jumped 44% on a year-over-year basis. The management expects Solar Energy Capacity Installed growth to be approximately 25% for the full year 2022. Sunrun Inc. (NASDAQ:RUN) is one of the best clean energy stocks to buy now. 

On October 20, JPMorgan analyst Mark Strouse reaffirmed an Overweight rating on Sunrun Inc. (NASDAQ:RUN) but slashed the price target on the stock to $55 from $65. The analyst expects demand to remain robust in Q3 for most alternative energy and services companies, driven by increasing power prices, despite concerns about the overall economy. 

According to Insider Monkey’s data, 36 hedge funds were bullish on Sunrun Inc. (NASDAQ:RUN) at the end of June 2022, compared to 37 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with approximately 13 million shares worth $303 million. 

Here is what Horizon Kinetics had to say about Sunrun Inc. (NASDAQ:RUN) in its Q2 2021 investor letter:

“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.

To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.

Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.

If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).

Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).

Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.

You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.

In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.

In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).

For the time being, Sunrun loses an extraordinary amount of money, an amount that has been getting larger. Perhaps there are economies of scale that will manifest in the future,so that it will attain profitability. Perhaps from the roughly one-half of Sunrun’s revenues that are from long-term customer service agreements that run up to 25 years. For now, though, the company would seem to require a lot of external financing, and that is one of the greatest business risks.”

3. SolarEdge Technologies, Inc. (NASDAQ:SEDG)

Number of Hedge Fund Holders: 40

SolarEdge Technologies, Inc. (NASDAQ:SEDG) is an Israel-based company that designs, develops, and sells direct current optimized inverter systems for solar photovoltaic installations worldwide. On November 7, SolarEdge Technologies, Inc. (NASDAQ:SEDG) posted a Q3 revenue of $836.7 million, up 58.9% year-over-year, beating estimates by $12.29 million. The solar segment reported a record revenue of $788.6 million. SolarEdge Technologies, Inc. (NASDAQ:SEDG) is one of the best clean energy stocks on Wall Street. 

On November 10, Wells Fargo analyst Michael Blum raised the price target on SolarEdge Technologies, Inc. (NASDAQ:SEDG) to $306 from $283 to reflect a higher EBITDA estimate, while maintaining an Overweight rating on the shares following the Q3 results. The analyst continues to like its broad geographic exposure and resilient market position, which should drive solid growth in the future.

According to Insider Monkey’s Q2 data, SolarEdge Technologies, Inc. (NASDAQ:SEDG) was part of 40 hedge fund portfolios, compared to 47 in the prior quarter. Ian Simm’s Impax Asset Management held the largest stake in the company, consisting of 580,909 shares worth $158.20 million. 

Here is what ClearBridge International Growth EAFE Portfolio has to say about SolarEdge Technologies, Inc. (NASDAQ:SEDG) in its Q2 2022 investor letter:

“We are well-positioned to participate in the accelerating energy transition. High and rising utility costs combined with policy support are driving increased penetration of home solar plus storage systems in Europe. Israel-based SolarEdge Technologies (NASDAQ:SEDG) expects to see significant growth in solar installations in this market led by Germany and Italy, among others, where consumers are not only demanding solar on the roof but a complete system solution including batteries. This phenomenon is accelerating revenue growth for these companies.”

2. Enphase Energy, Inc. (NASDAQ:ENPH)

Number of Hedge Fund Holders: 53

Enphase Energy, Inc. (NASDAQ:ENPH) is a California-based company that designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. On October 25, the company reported a Q3 non-GAAP EPS of $1.25 and a revenue of $634.71 million, topping Wall Street estimates by $0.16 and $18.85 million, respectively. The revenue increased 80.6% compared to the prior-year quarter. 

On October 26, Cowen analyst Jeffrey Osborne raised the price target on Enphase Energy, Inc. (NASDAQ:ENPH) to $335 from $278 and maintained an Outperform rating on the shares. The analyst noted that demand continues to be resilient as Enphase Energy, Inc. (NASDAQ:ENPH) will add production capacity both in Europe and the United States. 

Among the hedge funds tracked by Insider Monkey, Enphase Energy, Inc. (NASDAQ:ENPH) was part of 53 public stock portfolios at the end of June 2022, compared to 57 in the prior quarter. Philippe Laffont’s Coatue Management is the biggest stakeholder of the company, with 1.36 million shares worth about $267 million. 

Carillon Tower Advisers made the following comment about Enphase Energy, Inc. (NASDAQ:ENPH) in its Q3 2022 investor letter:

“Enphase Energy, Inc. (NASDAQ:ENPH) provides technology to manage solar generation, storage, and communication on one platform. The company reported an impressive quarter that exceeded investor expectations on all meaningful metrics, which sent shares higher. The stock remains a useful way to gain exposure to the secular theme of alternative energy and could benefit from the recently passed Inflation Reduction Act.”

1. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 59

NextEra Energy, Inc. (NYSE:NEE) is a Florida-based company that generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, coal, and natural gas facilities. NextEra Energy, Inc. (NYSE:NEE) is one of the best clean energy stocks to buy now. On October 14, the company declared a quarterly dividend of $0.425 per share, in line with previous. The dividend is payable on December 15, to shareholders of record on November 25. 

On October 24, Guggenheim analyst Shahriar Pourreza maintained a Buy rating on NextEra Energy, Inc. (NYSE:NEE) but trimmed the price target on the shares to $99 from $108. The analyst updated select estimates ahead of Q3 earnings season from the Power and Utilities group to reflect “known and measurable year-over-year items,” to adjust for seasonality, and to re-mark to the latest commodity curves.

According to the second quarter database of Insider Monkey, 59 hedge funds were bullish on NextEra Energy, Inc. (NYSE:NEE), compared to 64 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 16.2 million shares worth $1.25 billion. 

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NextEra Energy, Inc. (NYSE:NEE) was one of them. Here is what the fund said:

“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc. (NYSE:NEE), an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.

The energy transition would be extremely helpful for climate change and Iberdrola ranks well on our ESG matrix. NextEra, meanwhile, recently raised future earnings forecasts, citing a very favorable macro environment for rapid renewable generation expansion driven by decarbonization of the U.S. economy and the relative attractiveness of renewable generation in the context of high natural gas and power prices.”

You can also take a look at 10 Best Data Center Stocks To Buy and Goldman Sachs Energy Stocks. 

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