The green revolution is moving at full speed. From battery technology to autonomous electric vehicles, the future will look nothing like the past. For investors the best green energy stocks to buy will both disrupt consumer behavior and produce enormous returns. Which companies are the top contenders?
Tesla Selloffs Have Historically Been Great Buys
Electric vehicle (EV) stocks are hot property right now, with the meteoric rise of Elon Musk’s flagship Tesla brand appreciating in price over 1,000% in 2020 alone.
But there’s no doubt that Tesla’s extraordinary results have had some investors questioning whether the EV manufacturer’s stock is currently over-valued.
Indeed, there’s a lot of bearish sentiment around the company these days. But then, there’s also a fanatical army of loyal supporters too.
Turning to the firm’s latest SEC filings, eyebrows were raised when Elon Musk altered his official title from CEO to Technoking of Tesla. A joke, maybe, but it doesn’t sit well when other things aren’t going the company’s way. And when, like many other tech stocks of late, Tesla is dealing with a drop in share price of ~25% from all-time highs, it seems even more inappropriate.
Yet, Tesla isn’t like all the other companies, and, given that its recent price fall has more to do with wider market forces, such as rising treasury yields and a short squeeze on options traders, it might be given some leeway in the circumstances.
Tesla (TSLA) is still a growth company and remains a safe go-to stock for an EV market play. When sell-offs come to an end, investors should find reason to buy-in, especially given the company’s profitability and cash-flow positive status.
SunPower Market Opportunity Is Massive
Solar technology seems like it’s been around for a long time now, and you might be forgiven for thinking that the market has reached saturation levels, and all innovations associated with the industry have dried up.
Yet, according to SunPower, a leading solar energy outfit that provides solar solutions for both home-owners and businesses, that might not be the case.
In its latest financial results presentation, the company made the bold claim that the total addressable market for its products could grow tenfold to $250 billion between 2020 and 2050.
To put this into perspective, SunPower’s total annual revenues for 2020 were $1.13 billion. SunPower expects there to be 21 million homes in the US with solar storage by 2050, all of which will need increased power by that time for Electric Vehicle and Smart Home energy usage.
So does this expected market growth make SunPower a good buy right now? On the face of recent stock market volatility, the answer could be “no”. However, its latest quarterly results offered a lot to be happy about.
The company did miss the Street’s revenue predictions by a small amount, but won big by beating EPS expectations by 100%, posting a non-GAAP EPS of $0.14 compared to the analyst’s consensus of $0.07. The implication here is that SunPower managed to slash its operating margins, and, even in the face of slightly declining revenues, was still able to generate double the value for investors.
Given these numbers, SunPower’s depressed share price might open up the perfect opportunity to get in with a discount on this already well performing business.
TPI Composites Riding The Wind Power Revolution
TPI Composites is the world’s largest independent manufacturer of wind turbine blades, with facilities located globally in the US, China, India, Denmark, Turkey and Mexico.
The company provides products for some of the biggest names in the wind turbine engineering industry, including Siemens Gemesa, ENERCON and Vesta, and services a total of 53 contract lines at the current time.
Electricity production from wind is growing at a rapid rate, with economies of scale, political pressure, and technological improvements all driving increased demand. In 2001, less than 1% of electricity was generated from wind power, with this growing to 5% globally in 2019. Because of this, TPI Composites is an attractive play for investors looking to make a foray into this emerging and lucrative market.
The company has enviable financial numbers too, even after a difficult year arising out of the COVID-19 crisis. The business saw net sales of its wind blades for the full year 2020 grow by 18.9%, representing an 11% year-over-year increase in wind blade production.
Its cash position is still strong and only incurred a small increase in debt in what it admits was a challenging time. The firm was even able to make capital expenditure investments of over $65 million this year as well.
And with the global wind market expected to grow from 80 GW of production in 2021, to nearly 600 GW in 2029, along with the predicted pandemic recovery and regulatory support from the Biden administration in Washington DC, TPI Composites is perfectly poised to ride this growth curve for a long way yet.
NextEra Energy: Global Leader In Renewable Energy
There’s plenty to entice the prospective investor when it comes to NextEra Energy. The company is the world’s largest producer of renewable energy derived from wind and solar power, with an already established generation and distribution project in Florida, and a long-term battery storage operation in the works.
The firm also has a well-earned reputation for delivering value to its shareholders. Dividend payouts have increased from $0.36 in 2005 to $1.40 in 2020 and adjusted earnings per share have grown over the same period by a CAGR of around 8.7%.
And the future outlook for the business is extremely optimistic, with ambitions to create a $700 million solar farm at the site of its now-closed Iowa nuclear reactor, and a continually expanding capital deployment plan expected to top $60 billion over the years covering 2019 through 2022.
NextEra Energy also keeps on driving down costs for its customers, offering 30% lower bills than the US average, and roughly $11 billion of savings on fuel costs over the past 10 years. This is a company doing good things for consumers and investors alike.
Plug Power Growth Rate Is Astonishing
Plug Power is an interesting company operating in the hydrogen fuel cell (HFC) sector and is bucking the wider industry trend by trying to create a green and environmentally friendly method of producing its HFC technology.
The firm is a leading provider of turnkey solutions for the e-mobility market, and provides its vertically integrated products to companies such as Amazon, Walmart, and BMW.
As part of its 2024 vision, the company had set itself ambitious objectives, namely to hit $1.7 billion in yearly sales, and to generate a CAGR of 50%.
However, recently unearthed problems with its financial reporting have caused issues with the SEC. The company released a statement on March 16, 2021, stating to the effect that it must now resubmit all filings for fiscal 2018 and 2019, and quarterly for 2019 and 2020.
Because of this, Plug Power can now no longer make its deadline for its Form 10K this month, which puts investors in the dark as to its current situation.
Although this might seem like a rather vast problem, the issues are not expected to impact its cash position or its day-to-day business operations, and, conversely, the recent share price pull-back might actually be a buying opportunity in disguise.
Timing will be crucial here, with investors perhaps wanting to sit out the near-term and wait for the next published financial figures. But perhaps don’t wait too long; this 50% share price discount could disappear pretty quickly.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.