In this article, we discuss 5 renewable energy stocks to buy and hold for the next 10 years. If you want to see more stocks in this category, check out the 10 Best Renewable Energy Stocks to Buy and Hold for the Next 10 Years.
5. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 24
Bloom Energy Corporation (NYSE:BE) was incorporated in 2001 and is headquartered in San Jose, California. The company designs and manufactures solid-oxide fuel cell systems for on-site power generation. On August 17, Bloom Energy Corporation (NYSE:BE) priced its underwritten public offering of 13 million common shares at a public offering price of $26 per share, for expected gross proceeds of $338 million. The offering concluded on August 19.
On August 25, BofA analyst Julien Dumoulin-Smith resumed coverage of Bloom Energy Corporation (NYSE:BE) with a ‘Buy’ rating and an unchanged price target of $34 after the equity raise. He continues to see momentum for the rest of 2022 at Bloom Energy Corporation (NYSE:BE) and argued that “many opportunities” are not factored in the present share price.
According to Insider Monkey’s data, 24 hedge funds were bullish on Bloom Energy Corporation (NYSE:BE) at the end of June 2022, compared to 29 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a prominent shareholder of the company, with more than 1 million shares worth $17 million.
4. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 25
Sunnova Energy International Inc. (NYSE:NOVA) is a Texas-based company that provides residential solar energy systems in the United States. On August 17, Sunnova Energy International Inc. (NYSE:NOVA) priced a $500 million aggregate principal amount of 2.625% convertible senior notes due 2028 in a private placement. The net proceeds from the upsized offering are estimated to be $487 million. The sale of the notes closed on August 19.
On August 4, Barclays analyst Christine Cho initiated coverage of Sunnova Energy International Inc. (NYSE:NOVA) with an ‘Overweight’ rating and a $35 price target. The analyst has a Positive view of the North American clean technology space. Within residential solar, she sees Sunnova Energy International Inc. (NYSE:NOVA) as one of the best positioned firms. The case for solar is “as attractive as it’s ever been and this secular growth trend will continue,” the analyst told investors. She said the Inflation Reduction Act of 2022 “provides tailwinds after several setbacks” for the sector.
According to Insider Monkey’s Q2 data, Sunnova Energy International Inc. (NYSE:NOVA) was part of 25 hedge funds’ portfolios, compared to 26 funds in the prior quarter. Electron Capital Partners is a prominent shareholder of the company, with more than 3 million shares worth $56.5 million.
Here is what the Clearbridge Investments Small Cap Strategy had to say about Sunnova Energy International Inc. (NYSE:NOVA) in its Q1 2022 investor letter:
“We initiated a new position in Sunnova (NYSE:NOVA), in the energy sector. Sunnova is a residential solar and energy storage company that enables adoption through a network of installers with options for financing, service and broader home energy management. Rising interest rates and solar energy supply constraints weighed on the stock’s performance in the fourth quarter of 2021 but created a compelling valuation opportunity to buy this business when the market was embedding low growth expectations. We believe Sunnova will deliver value accretive growth for a much longer time, with its downside limited by the long-term, fixed-rate, high- quality contracts it has with customers.”
3. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 26
Plug Power Inc. (NASDAQ:PLUG) is a New York-based company that provides clean hydrogen and zero-emissions fuel cell solutions. On August 25, Plug Power Inc. (NASDAQ:PLUG) stock gained 14.4% after the company announced an agreement to deliver liquid green hydrogen to Amazon.com, Inc. (NASDAQ:AMZN) beginning in 2025 to enable decarbonization of the latter’s operations. The Amazon deal will supply 10,950 tons per annum of liquid green hydrogen starting in January 2025, a growth initiative that is forecasted to help Plug Power Inc. (NASDAQ:PLUG) reach its $3 billion revenue goal by 2025.
Craig-Hallum analyst Eric Stine raised the price target on Plug Power Inc. (NASDAQ:PLUG) to $38 from $31 on August 26 and maintained a ‘Buy’ rating on the shares. The green hydrogen supply agreement with Amazon solidifies the relationship between the companies, the analyst told investors in a bullish thesis.
Among the hedge funds tracked by Insider Monkey, D E Shaw is the biggest stakeholder of Plug Power Inc. (NASDAQ:PLUG), with 3.6 million shares worth about $60.5 million. Overall, 26 hedge funds were long Plug Power Inc. (NASDAQ:PLUG) at the end of Q2 2022, compared to 33 funds in the earlier quarter.
2. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 36
Sunrun Inc. (NASDAQ:RUN) was founded in 2007 and is headquartered in San Francisco, California. The company develops and installs residential solar energy systems in the United States. The company reported Q2 revenue of $585 million, up 45.7% year-over-year, beating estimates by $83.7 million. Solar energy capacity installed in the second quarter of 2022 was 246.5 megawatts, up 33% from the prior year quarter. The firm’s management continues to expect growth in solar energy capacity installed to be 25% or more for the full year 2022.
Morgan Stanley analyst Stephen Byrd raised the price target on Sunrun Inc. (NASDAQ:RUN) to $79 from $70 and reaffirmed an ‘Overweight’ rating on the shares. The analyst said that the Inflation Reduction Act will offer the required support to boost decarbonization technologies that are on the verge of being commercially viable.
Among the hedge funds tracked by Insider Monkey, William B. Gray’s Orbis Investment Management held the biggest position in Sunrun Inc. (NASDAQ:RUN), with roughly 13 million shares worth $303 million. Overall, 36 hedge funds were bullish on the stock at the end of June, compared to 37 funds in the previous quarter.
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.”
1. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 53
Enphase Energy, Inc. (NASDAQ:ENPH) is a California-based company that develops and manufactures home energy solutions for the solar photovoltaic industry in the United States and internationally. On July 26, Enphase Energy, Inc. (NASDAQ:ENPH) reported its Q2 2022 results, posting earnings per share of $1.07 and revenue of $530 million, outperforming estimates by $0.22 and $24.8 million, respectively. The company announced upbeat guidance for Q3, expecting revenue of $590 million-$630 million, well above the $549 million consensus estimate.
On August 11, KeyBanc analyst Sophie Karp raised the price target on Enphase Energy, Inc. (NASDAQ:ENPH) to $363 from $230 and kept an ‘Overweight’ rating on the shares. Enphase Energy, Inc. (NASDAQ:ENPH) should continue to benefit from the Inflation Reduction Act. While she believes that in the short-term the stock might lag due to investor positioning, in the long-term, she expects Enphase Energy, Inc. (NASDAQ:ENPH) to deliver resilient top-line and earnings growth. Enphase Energy, Inc. (NASDAQ:ENPH) continues to execute and outperform expectations as it is one of the best positioned names in her Alternative Energy coverage, the analyst contended.
According to Insider Monkey’s data, 53 hedge funds were bullish on Enphase Energy, Inc. (NASDAQ:ENPH) at the end of Q2 2022, compared to 57 funds in the earlier quarter. Philippe Laffont’s Coatue Management is the leading position holder in the company, with 1.36 million shares worth $267 million.
Here is what the ClearBridge Investments Sustainability Leaders Strategy had to say about Enphase Energy, Inc. (NASDAQ:ENPH) in its 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.”
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