In this article, we look at the 6 Best Geothermal Stocks To Invest In.
Geothermal Energy
Geothermal energy is a type of renewable energy source derived from the continuous heat generated within the Earth. This heat is produced by the slow decay of radioactive particles in the Earth’s core and can be used for various applications such as generating electricity and heating. Unlike other renewable energy sources such as wind and solar, geothermal energy is stable and offers a constant and reliable supply of power, regardless of weather conditions or time of day. Additionally, geothermal plants have a smaller land footprint compared to wind farms and solar panels, making them a more efficient choice for regions with high geothermal activity.
According to a report by Fortune Business Insights, the global geothermal energy market was valued at $70.14 billion in 2024 and is expected to grow from to $117.02 billion by 2032, with a CAGR of 6.61%. The Asia-Pacific region leads the geothermal industry and holds a market share of 37.14%. In the U.S., the focus is on maximizing renewable electricity output, particularly through Geothermal District Heating (GDH) systems. According to the GeoVision report, the U.S. has the potential to establish 17,500 GDH systems by 2050. Currently, only 23 systems are operational nationwide.
One of the key hurdles for geothermal development has been the high cost and risk of drilling and finding viable resources, companies are overcoming these challenges with innovative drilling techniques. These advancements enable the creation of geothermal wells without depending on a site’s natural permeability. Companies are also making drilling wells more cost-effective and sustainable by using a proprietary thermally conductive material and recycling water through a closed-loop system, which can extend the lifespan of its wells to over 30 years, making the technology attractive for long-term energy production.
Geothermal Energy Market Set for Growth
After years of slow development, geothermal energy is gaining serious momentum and investors are increasingly bullish on geothermal due to technological breakthroughs. Andrew Beebe, Managing Director at Obvious Ventures, believes the innovations now being developed will make geothermal energy more predictable, cost-effective, and scalable. As new technologies make geothermal wells more efficient, scalable, and cost-effective, the sector is poised for rapid growth, offering a unique opportunity for forward-thinking investors. Geothermal startups are proving that, with the right innovations, the industry can evolve and meet the world’s growing energy needs. The recent influx of capital is just the beginning, as investors see significant potential in a sector that has long been underutilized.
In the last six months alone, at least six geothermal startups have successfully closed funding rounds, one of the latest companies to benefit from this investment wave is XGS Energy, which announced an additional $20 million in Series A financing. The company’s closed-loop system for reusing water in injection wells is a key innovation, designed to make geothermal energy more efficient and scalable. This is part of a broader trend, with companies like Zanskar Geothermal & Minerals raising $30 million in Series B funding for AI-powered geothermal exploration, and Fervo Energy securing $244 million in Series D financing. The U.S. Department of Energy estimates that geothermal could provide 8.5% of the country’s electricity by 2050.
Geothermal’s ability to provide consistent power, combined with a smaller environmental footprint, makes it an attractive alternative to other renewable options. The U.S. has vast untapped potential in areas like Geothermal District Heating, with increased investment and innovation, the geothermal industry is well-positioned to contribute to the world’s renewable energy goals. With that in context let’s take a look at the 6 best geothermal stocks to invest in.
Photo by Mark Kuiper on Unsplash
Our Methodology
For this article, we used green energy ETFs plus online rankings to compile an initial list of 15 geothermal stocks. From that list, we shortlisted companies according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. Here is the list of 6 best geothermal stocks to invest in sorted in ascending order of their number of hedge funds as of Q2.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
6 Best Geothermal Stocks To Invest In
6. Eversource Energy (NYSE:ES)
Number of Hedge Fund Investors in Q2 2024: 26
Eversource Energy (NYSE:ES) is a major energy provider in the New England region, serving over 4 million customers through subsidiaries such as Connecticut Light and Power (CL&P), NSTAR Electric, Public Service Company of New Hampshire (PSNH), and Aquarion Company. Offering electric, gas, and water utility services, Eversource Energy (NYSE:ES) is dedicated to promoting green energy initiatives and is actively investing in wind and geothermal projects as part of its strategy to transition to more sustainable energy sources.
On June 4, Eversource Energy (NYSE:ES) launched a geothermal project in Framingham, Massachusetts. It’s the company’s first utility-scale geothermal network in the U.S. Over the next two years, the project will test whether this geothermal system is a cost-effective and efficient alternative to traditional heating fuels such as oil and natural gas.
The pilot project involves 31 residential and 5 commercial buildings, where participants will be connected to a one-mile loop that circulates fluid to provide heating and cooling. Eversource Energy (NYSE:ES) has partnered with the local government, community groups, and environmental organizations to make this project a reality. If successful, the company plans to expand the use of geothermal energy across New England, helping reduce carbon emissions and supporting the region’s clean energy goals. Eversource Energy (NYSE:ES) is also exploring the use of geothermal heat pump systems for residential and commercial applications.
Eversource Energy’s (NYSE:ES) stock is trading 14.91 times its earnings, which is an almost 15.27% discount compared to the sector median of 17.60. Analysts have a consensus Buy rating on the stock, with an average price target of $73.26 which indicates a potential 7.49% upside from current levels. As of the second quarter, Eversource Energy’s (NYSE:ES) stock is held by 26 hedge funds, with a total stake valued at $622.20 million. Zimmer Partners is the largest shareholder in the company and owns shares worth $924.57 million as of June 30.
5. Baker Hughes (NASDAQ:BKR)
Number of Hedge Fund Investors in Q2 2024: 41
Baker Hughes (NASDAQ:BKR) is a global leader in oilfield services and equipment and serves clients in over 120 countries. The company has been expanding its focus on renewable energy technologies, particularly in geothermal energy using its advanced geothermal drilling solutions.
Baker Hughes (NASDAQ:BKR) possesses Advanced Geothermal Systems (AGS), which use closed-loop technology to enhance energy extraction from wells, through its investment in GreenFire Energy. This enables repurposing its oil and gas infrastructure for geothermal energy by producing energy from abandoned oil and gas wells by retrofitting existing wells. Using these wells, Baker Hughes (NASDAQ:BKR) can harness geothermal energy for both power generation and direct-use applications, which will help revitalize depleted fields and make previously uneconomical projects viable. In March, Baker Hughes (NASDAQ:BKR) also announced a collaboration with Earths Energy (ASX:EE1) to explore, develop, and commercialize geothermal projects in Australia by leveraging its technology capabilities.
As the world continues to transition toward cleaner energy sources, Baker Hughes’ (NASDAQ:BKR) advanced technology, global reach, and deep industry expertise give it a distinct competitive advantage in the growing geothermal market. Analysts expect the company to increase its earnings by almost 32% this year and have a consensus Buy rating on the stock, with an average price target of $43.14 which indicates a potential 25.45% upside from current levels. As of the second quarter, Baker Hughes’ (NASDAQ:BKR) stock is held by 41 hedge funds, with a total stake valued at $1.16 billion. AQR Capital Management is the largest shareholder in the company and owns shares worth $223.52 million as of June 30.
