In this article, we shall discuss the 5 best clean energy stocks to invest in. To read our detailed analysis of the clean energy sector in 2022, go directly and see 14 Best Clean Energy Stocks to Invest In.
5. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holdings: 31
Based in San Francisco, California, Sunrun Inc. (NASDAQ:RUN) is an American company which specializes in the production and development of photovoltaic solar energy generation systems and battery energy storage products, and is one of the best clean energy stocks to invest in. The company beat EPS estimates by $0.07 in Q2 2022, posting an EPS actual of -$0.06 against consensus -$0.13.
On August 18, Morgan Stanley analyst Stephen Byrd raised the price target on Sunrun Inc. (NASDAQ:RUN) shares to $79 from $70, keeping an Overweight rating on the shares.
Here is what Horizon Kinetics had to say about Sunrun Inc. (NASDAQ:RUN) in their 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 in 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”… Click Here to Continue Reading
4. General Electric Co. (NYSE:GE)
Number of Hedge Fund Holdings: 49
Based in Boston, Massachusetts, General Electric Co. (NYSE:GE) is an American multinational conglomerate which has a global electric generation capacity of more than 400MWs. The company also has wind turbines with rated capacities from 2-6MWs to suit variety of environments. As of Q2 2022, the company posted a total revenue of $18.65 billion, with an EPS of $0.78, beating estimates of $0.37 by $0.41.
On August 16, Bernstein analyst Brendan Luecke conferred General Electric Co. (NYSE:GE) with an Outperform rating and with a price target of $100, down from $105.
Here is what Longleaf Partners had to say about General Electric Co. (NYSE:GE) in their Q2 2022 investor letter:
“General Electric Company (NYSE:GE) – Aviation, Healthcare and Power conglomerate GE was punished in the quarter amid top-down economic fears for this collection of seemingly cyclical businesses. However, the market is not giving the company credit for the material improvements CEO Larry Culp has made in his tenure. The balance sheet today is stronger than it has been in a very long time, and each of the three primary business segments each have strong paths to increasing earnings, regardless of the economic environment. Healthcare has historically not been a cyclical business. While Aviation typically has some economic sensitivity, the business still has a strong COVID rebound tailwind that should continue even in an uncertain environment. Power is a less cyclical business, and GE maintains a steady business servicing approximately one-third of the world’s electricity. GE is another example of strong insider buying indicating management’s confidence in the business, while the company also began buying back discounted shares. GE is still on track to break the company into three separate businesses, and we believe this will help the market properly weigh the value of each core segment.”
3. Enphase Energy Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holdings: 53
Based in Fremont, California, Enphase Energy (NASDAQ:ENPH) is an American energy technology company which focuses on the development and manufacture of solar micro-inverters, battery energy storage, and EV charging stations, primarily targeting residential customers. It is one of the first companies in the world to produce and commercialize the solar micro-inverter, which successfully facilitates the transition from direct current power generated by a solar panel, into grid-compatible alternating current for use or export. Enphase (NASDAQ:ENPH) has reported an annual revenue growth of 67.75% year-on-year in Q2 2022, posting a total revenue of $530.2 million. In Q2 2022, the company posted an EPS of $1.07, beating estimates of $0.84 by $0.23. As of the second quarter of 2022, the company stock seems to be heavily valued based on multi-year estimates.
On August 8, JPMorgan analyst Mark Strouse elevated the price target on Enphase Energy (NASDAQ:ENPH) to $321 from $261, keeping an Overweight rating on the shares.
Here is what ClearBridge Investments had to say about Enphase Energy (NASDAQ:ENPH) in their Q1 2022 investor letter:
“Enphase Energy (NASDAQ:ENPH) is a key solar holding that should be able to take advantage of greater incentives for solar installations in many geographies. The company was also a strong contributor for the quarter, overcoming pressures of a higher discount rate on their strong projected future earnings, raw material inflation and supply chain challenges as their long-term value was reaffirmed.”
2. NextEra Energy Inc. (NYSE:NEE)
Number of Hedge Fund Holdings: 59
Based in Juno Beach, Florida, NextEra Energy (NYSE:NEE) is an American energy company with over 58GWs of generating capacity. As of Q2 2022, NextEra Energy Resources is the world’s largest generator of renewable energy, with approximately 65% of NextEra Energy’s (NYSE:NEE) generating capacity coming from renewables like wind, solar, and hydroelectric power.
On September 14, Credit Suisse analyst Nicholas Campanella raised the price target on NextEra Energy (NYSE:NEE) to $98 from $79, keeping an Outperform rating on the shares.
Here is what ClearBridge Investments had to say about NextEra Energy (NYSE:NEE) in their Q2 2022 investor letter:
“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.”
1. Tesla Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holdings: 72
Based in Austin, Texas, Tesla Inc. (NASDAQ:TSLA) is an American multinational automotive and clean energy company. Widely regarded as one of the most valuable companies in the world, the company has a market cap of more than $862.7 billion, as of September 26. In fiscal 2021, the company reported record sales of BEVs and PHEVs, capturing effectively 21% of the battery-electric (purely electric) market and 14% of the plug-in market (which includes plug-in hybrids). Furthermore, in addition to being one of the biggest producers of battery energy storage systems in the world, The Tesla Energy Plan is an energy tariff which automatically transfers one’s reserve energy to the local grid during times when demand is high, offering 100% renewable electricity support. As of the second quarter of 2022, Citadel Investment Group is the largest shareholder in the company. In Q2 2022, the company posted an EPS of $0.76, beating estimates of $0.60 by $0.16. It also reported a revenue of $16.93 billion in Q2 2022.
On September 20, Morgan Stanley analyst Adam Jonas conferred Tesla Inc. (NASDAQ:TSLA) with an Overweight rating and $383 price target. In his research note, he stated that although the company is facing ruthless competition from domestic Chinese EV companies in the present and is heavily dependent on their demand and supply ecosystems, it is well-leveraged to overcome this dependency by the end of 2023. This will occur in the backdrop of capacity growth in the U.S. and Europe in addition to greater levels of vertical integration. Jonas maintains that Tesla’s (NASDAQ:TSLA) NAFTA and EU subsidiaries will soon comply with initiatives such as the IRA and other similar legislative acts enforced by the EU. This will lead China to roll back its penetration into Tesla’s (NASDAQ:TSLA) demand footprint and supply ecosystem.
Here is what Baron Funds had to say about Tesla (NASDAQ:TSLA) in their Q2 2022 investor letter:
“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s (NASDAQ:TSLA) prospects. That was principally for two reasons:
- First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
- second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.
Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful.
Regardless, I was right to have spoken with Roger. That was since he outlined numerous issues we needed to consider, study, and question before we determined whether we believed Tesla could be a successful business…before we ultimately chose whether to invest in that company.
When we completed our initial due diligence on Tesla (NASDAQ:TSLA), which diligence has been ongoing since 2014, we decided to invest $360 million in Tesla (NASDAQ:TSLA) over the next two years. I then called Roger and outlined why I thought we could earn 20 times our capital over the next 10 years. Roger was so certain I was wrong that he offered to bet me $1 million that Tesla (NASDAQ:TSLA) would fail. “Roger, I can’t bet you a million dollars. First, if you are right, I couldn’t afford to pay you. Second, if I’m right, you’re my friend, and I couldn’t take your money.”
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