We recently compiled a list of the 8 Best Wind Power and Solar Stocks to Buy. In this article, we are going to take a look at where Sunrun Inc. (NASDAQ:RUN) stands against the other wind power and solar stocks.
It is arguably one of the best times to pursue investment opportunities around wind power and solar stocks as the United States moves to achieve 100% clean energy use by 2035 and reduce emissions by 50 to 52% by 2030. As the US advocates for various initiatives to help tackle the climate crisis and keep a 1.5 C limit on warming, the case for the best wind power and solar stocks to buy is becoming clear.
The US wind power and solar capacity were more significant than ever last year as part of the country’s long growth trend for renewable energy. A total of 425,235 gigawatts hours of electricity were generated from Wind power, accounting for more than 12% of the country’s grid. Wind power has been the country’s largest renewable energy source since 2019.
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On the other hand, solar energy accounted for less than 4% of all the US power generation, affirming plenty of room for growth in the coming years. Likewise, solar power generation is projected to grow by 75%, from 163 billion kWh in 2023 to 286 billion kWh by 2025. Wind power is projected to increase by 11%.
Nevertheless, clean energy stocks had one of the worst runs in 2023 as they posted an average annual return of -10.5%, slightly improving from an average return of -11% a year ago. The underperformance of 2022 was attributed to the high inflation levels that saw investors’ sentiments take a significant hit.
Likewise, the underperformance of wind and solar energy stocks persisted in 2023 owing to the rising interest rates as the US Federal Reserve tried to tame runaway inflation. Given that most solar and wind companies must rely on the debt markets to raise capital, most have faced significant challenges amid the high interest rate environment.
The situation was further exacerbated by supply chain problems amid difficulties obtaining renewable energy equipment like wind turbines and solar panels over the past two years. Matthew Donen, equity analyst at Morningstar, said:
“We see several challenges for participants in the wind energy sector. Wind turbine manufacturers have struggled to restore profitability from unprecedented cost inflation in 2021, and developers of wind projects have recorded billions in impairments due to higher equipment costs and an increase in interest rates.”
Fast forward, clean energy stocks are on the move as investors take note of their depressed valuations. The growing demand for wind and solar energy for use in electric vehicles, building heating, and use in industrial settings like data centers are some of the catalysts driving growth in the sector.
In the aftermath of the European Central Bank and the Bank of Canada cutting interest rates, the best wind power and solar stocks again started seeing increase in investor positioning.
However, there are growing concerns that clean energy companies could come under pressure amid uncertainty around the US presidential election. The prospect of Republicans taking over the Whitehouse and Congress, raises the prospects of tax credits under the Inflation Reduction Act (IRA) being affected.
Nevertheless equity analyst Donen believes it would be difficult for a Trump administration to get rid of all favorable tax policies that have bolstered sentiments around wind and solar stocks. Here’s what Donen said:
“We think it would be difficult for Trump to roll back favorable tax policy for renewable energy enjoyed from the 2022 Inflation Reduction Act. A Trump administration might be able to slow implementation of the Act, but that is unlikely to slow renewable energy growth in the short-run.”
With the world focused more than ever on combating the effects of global warming, including a shift from fossil fuels to clean energy, tremendous opportunities are cropping up. With the COP26 targeting net zero emissions by 2050, an investment of $4 trillion would be needed by 2030. This is one of the reasons investors should start paying attention to the best wind power and solar stocks to buy now, and let’s take a look at them now.
Our Methodology
To compile the list of the best wind power and solar stocks to buy, we scoured different solar and wind energy ETFs and picked 8 of the top companies with tremendous upside potential. Once we had consolidated the list, we ranked the stocks based on the number of hedge funds that owned it.
At Insider Monkey, we are obsessed with 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 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).
A field of solar panels glistening in the afternoon sun, symbolizing the company’s renewable energy ambitions.
Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Investors: 35
Stock Upside Potential: 14.78%
Sunrun Inc. (NASDAQ:RUN) is one of the best wind power and solar stocks to buy as it is focused on solar energy systems. The company designs, manufactures, and sells solar energy systems like panels and battery storage solutions. While the company’s primary customers are residential homeowners, it also deals with commercial developers.
Sunrun Inc. (NASDAQ:RUN)’s competitive edge stems from its focus on becoming a home electrification partner rather than offering home solar. Consequently, it has set out to offer home batteries, vehicle charging, and grid services as it diversifies its revenue streams.
The company has already inked a strategic partnership with Ford to act as the primary installer of its Intelligence backup power and installation of Ford Charge Station Pro and Home Integration System. Sunrun Inc. (NASDAQ:RUN) has also signed a deal to help Puerto Rico rebuild its energy system through a 17-megawatt virtual power system.
In Q2 2024, Sunrun Inc. (NASDAQ:RUN) registered 26,687 customer additions, including 24,984 subscriber additions. Annual Recurring Revenue from Subscribers was approximately $1.5 billion as of June 30, 2024
“In the second quarter, we again set new records for both storage installation and attachment rates, further differentiating Sunrun in the industry, beating the high-end of our storage installation guidance and delivering solid quarter-over-quarter growth for solar installation, Cash Generation, and Net Subscriber Value. Our primary focus is on expanding our differentiation, launching additional products and services to expand customer lifetime values, and remaining a disciplined, margin-focused leader in the sector to drive meaningful Cash Generation, ” said Mary Powell, Sun Run’s Chief Executive Officer.
Analysts on Wall Street have a Buy rating on Sunrun Inc. (NASDAQ:RUN) with an average price target of $20.50, potentially implying a 14.78% upside. Additionally, 35 hedge funds held stakes in the company as of the end of the second, according to the Insider Monkey database. Of those, William B. Gray’s Orbis Investment Management is the company’s top shareholder, with positions worth $164.80 million.
Overall RUN ranks 5th on our list of the best wind power and solar stocks to buy. While we acknowledge the potential of RUN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RUN, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.