In this article, we will look at the 7 best alternative energy stocks according to analysts.
Growing Investments in the Clean Energy Transition
According to a report by the International Energy Agency, clean energy investment grew by approximately 50% from 2019 to 2023, reaching $1.8 trillion with a growth rate of 10% per year. The annual addition of solar photovoltaics and wind reached 85% and 65% respectively in 2023. However, the increase in clean energy deployment was not translated into market investments. The industry underperformed in 2023, with many investors pulling out their investments. However, On May 7, Reuters reported that clean energy generation and distribution exchange-traded funds (ETFs) are beginning to outperform oil and gas ETFs. Since 2022, the ETFs tied to renewable energy generation and distribution have declined between 20% and 70% of their value, driven by the rising interest rates and a slowdown in clean energy deployment, which led to declining stock prices and earnings of the stocks. This resulted in the increased earnings of oil and gas producers, with returns of over 50% during the same period. The declining trend of clean energy ETFs is reversing with ETFs tied to the energy transition, reporting positive returns as a leading oil and gas exploration ETF, SPDR S&P Oil & Gas Exploration & Production ETF lost nearly 5%. Major renewable energy ETF, iShares Global Clean Energy ETF has surged nearly 13% over the past month, as of May 23.
Major energy companies with prominent oil and gas business segments are transitioning to alternative energy sources, in line with their clean energy and carbon neutrality goals. For instance, on April 22, the Chief Executive Officer of a leading energy company, Equinor, Anders Opedal spoke to CNBC about its renewable investments outlook. Opedal said that the company is increasing its investments in renewables. However, the investments have to be profitable for the company. He added that the company is focused on investments in developing offshore wind and solar plants. The company has presented an income of $46 million for its renewable business, which is expected to increase while keeping it profitable. It aims to achieve a smooth and balanced energy transition with the participation of all concerned stakeholders including the government, consumers, and industries. He said:
“To be able to do the energy transition you know everyone needs to participate and really need to work. Together we need governments we need Industries. We need consumers. We have to admit that to do this will take time. We have a very efficient energy system built up over many many many years and now we are transitioning into another another energy system. This will cost and it’s important to make sure that while we are transitioning, we have enough energy in the system such that it’s affordable and that over time it can be more sustainable so we need to find that balance such that everyone can participate.”
Massive Surge in Solar as an Alternative Energy Source
Nextracker is one of the best alternative energy stocks with high upside potential. The company specializes in energy solutions providing solar trackers for utility-scale and ground-mounted distributed generation. On May 14, the company released its earnings for the first quarter of 2024. It reported earnings per share of $0.96 and surpassed estimates by $0.27. The company generated a revenue of $736.52 million for the quarter, representing a year-over-year increase of 42.08%.
On May 15, the founder and CEO of Nextracker, Dan Shugar was interviewed on CNBC regarding the company’s strong earnings report. Shugar believes that demand for solar is accelerating rapidly in the United States and internationally. This growth can also be observed in the company. performance. The solar tracking leader is serving nearly 40 countries across the world, with the United States being its strongest market. It is also experiencing strong growth in its international market including South America, Australia Africa, the Middle East, and India. This led to an increase in its backlog for 2024 reporting $4 billion, which was previously $2.6 billion in 2023. In the past two years, it has nearly doubled from its previous value. He further added that the company has experienced a compound annual growth of nearly 30% over the past six years in a row. Shugar believes there is a massive surge in solar with more than 7,000 projects with a total capacity of 1,500 GW waiting for grid connection. Battery storage is making solar one of the most attractive alternative energy options in the renewable market. The solar applications for connections are 25 times higher compared to fossil fuels, said Shugar. To address the losses related to solar energy, the company has also developed a hail technology.
Another leading name in the solar market, Sunrun is a major provider of clean energy. It is engaged in the design, manufacturing, installation, sale, and acquisition of residential solar systems. On May 8, the company announced that it has connected over 16,200 customers to California’s electrical grid during the summer, supported by its CalReady power plant. The company is proving the efficiency and reliability of its solar-plus-storage systems, by supporting the grid operations of California. In 2023, the leading residential solar company also supplied nearly 32 megawatts of power to Pacific Gas and Electric Company. The Chief Executive Officer of Sunrun, Mary Powell said that the company is leading the clean energy transition by providing its customers with reliable and efficient solutions. She said:
“We are on the forefront of a customer-led revolution to a cleaner, more affordable clean energy future. When presented with the opportunity to help, Sunrun’s customers always step up to be part of the solution. By sharing their clean solar power, they are making California’s grid more resilient for everyone. Sunrun’s CalReady is far and away the largest virtual power plant in the country and serves as a model for what the electric grid of the future should look like.”
With this context, let’s look at the 7 best alternative energy stocks according to analysts.
Solar panels in an agricultural field, highlighting the company’s commitment to renewable energy.
Methodology
To compile our list of the 7 best alternative energy stocks according to analysts, we used stock screeners from Yahoo Finance and Finviz, and shortlisted the stocks with a market valuation higher than $1 billion, as of May 21. We also reviewed multiple similar rankings by Insider Monkey and various clean energy ETFs to form a list of 30 alternative energy stocks. We picked the 7 stocks that received the most buy or buy-equivalent ratings from Wall Street analysts and also had the highest average upside potential, as of May 21. The 7 best alternative energy stocks to buy according to analysts are arranged in ascending order of their average upside potential.
We also added the hedge fund sentiment for each stock. The hedge fund data was taken from Insider Monkey’s database of over 900 elite hedge funds as of the first quarter of 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple, our research has shown that we can outperform the market by imitating the top stock picks of best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Alternative Energy Stocks To Buy According to Analysts
7. Enphase Energy Inc. (NASDAQ:ENPH)
Average Upside Potential as of May 21: 14.59%
Number of Hedge Fund Holders: 41
Enphase Energy Inc. (NASDAQ:ENPH) is one of the best alternative energy stocks to buy according to analysts. The company specializes in the design, manufacturing, and sale of semiconductor-based microinverters, IQ gateway, IQ batteries, and cloud-based monitoring and control. On May 21, the company announced that it has introduced the IQ8 Microinverters in Finland’s solar market. The microinverter has a peak output AC power of up to 384 watts. With the rise in the installed solar capacity of Finland, the IQ8 Microinverters will help maximize energy production. The microinverters are capable of managing a continuous direct current (DC) of 14 amperes. Its series of IQ8 microinverters can be paired with a range of up to 560 W DC solar modules.
Based on the consensus of 42 analysts as of May 21, Enphase Energy Inc. (NASDAQ:ENPH) has a Buy rating. The stock has an average price target of $130, which represents an upside of 14.59% from current levels.
According to Insider Monkey’s database, 41 hedge funds held stakes in Enphase Energy Inc. (NASDAQ:ENPH) in the first quarter of 2024, with shares worth $581.5 million. As of March 31, Citadel Investment Group is the largest shareholder in the stock, with positions exceeding $276.3 million.
6. First Solar Inc. (NASDAQ:FSLR)
Average Upside Potential as of May 21: 17.14%
Number of Hedge Fund Holders: 51
First Solar Inc. (NASDAQ:FSLR) specializes in the production and development of photovoltaic solar energy modules in the US, Asia, and Europe. It provides low-carbon alternatives by utilizing thin film semiconductor technology for its PV modules. It is also one of the stocks which account for about 50% of the Q1 portfolio of Michael Burry. Burry has opened a stake worth $5 million in the stock in the first quarter of 2024.
As of May 21, First Solar Inc. (NASDAQ:FSLR) has a Buy rating based on the consensus of 37 analysts. The average price target of the stock is $230 and the high price forecast is $356. Its average price target represents an upside of 17.14% from its current price of $196.34. On May 23, JP Morgan analyst Mark Strouse raised his price target from $240 to $262 and maintained an Overweight rating on the stock. It is one of the best alternative energy stocks according to analysts.
At the end of Q1 2024, 51 hedge fund managers were long First Solar Inc. (NASDAQ:FSLR). These funds had stakes worth $1.17 billion in the stock. Of the 51 funds, Citadel Investment Group is the biggest stakeholder in the company, with a position exceeding $385 million.
5. Xinyi Solar Holdings Limited (OTC:XISHY)
Average Upside Potential as of May 21: 22.93%
Number of Hedge Fund Holders: NA
Xinyi Solar Holdings Limited (OTC:XISHY) is a leading solar company, involved in the production and sale of solar glass products in China, Asia, Europe, and North America. It operates across two primary business segments, solar glass and solar farm business. As of May 21, the stock has a Buy rating from 17 analysts. The average price target of the stock is $6.53, which represents a 22.93% upside from its current price of $5.32.
On February 28, Xinyi Solar Holdings Limited (OTC:XISHY) released its annual results for the financial year 2023. The company recorded a consolidated annual revenue of HK$26.62 billion, representing a 29.6% year-over-year increase. Its gross profit increased by 15.1% and reached HK$7.09 billion. The profit attributable to the company’s equity holder rose by 9.6% and reached HK$4.18 million in 2023.
As of May 21, Xinyi Solar Holdings Limited (OTC:XISHY) has a market capitalization of $6 billion. It is ranked 5th on our list of the best alternative energy stocks according to analysts.
4. Nextracker Inc. (NASDAQ:NXT)
Average Upside Potential as of May 21: 41.89%
Number of Hedge Fund Holders: 47
Nextracker Inc. (NASDAQ:NXT) is a leading energy solutions company, involved in the development and sale of solar trackers and software for utility-scale and ground-mounted distributed generation solar projects. Its key tracking solutions include NX Horizon, NX Gemini, and NX Horizon-XTR. On April 23, the company announced that it has launched the first-ever low-carbon solar tracker solution, NX Horizon with up to 35% lower carbon footprint. The tracker will be initially available in the United States. Talking about its new low-carbon tracker, CEO Dan Shugar said:
“Our low carbon tracker delivers measurable results in decarbonizing solar power through circular and increasingly renewably powered steelmaking, optimized logistics, and careful selection of raw material providers. We appreciate our customers helping us drive toward a cleaner, more robust supply chain to provide third-party verification for providers and consumers of solar power to meet their Scope 3 and other decarbonization goals and requirements.”
Nextracker Inc. (NASDAQ:NXT) has a Buy rating based on the consensus of 29 Wall Street analysts. The stock has an average upside potential of 41.89% from its current price.
According to the Insider Monkey Database, 47 hedge fund managers held stakes in the stock, worth $825.64 million in the first quarter of 2024. As of May 23, the stock has surged nearly 45% over the past year.