Last year was a turbulent one for the energy sector, marked by the crippling effects of the global pandemic on demand. Additionally, the investment in fossil fuels has taken a hit, with the renewables market showing resilience. Many consider this to be the changing of the guard, with greater sustainable finance and investor interest in renewable energy stocks.
To illustrate the point, let me point out that the Invesco Solar ETF (NYSEARCA:TAN) is up 128% in the past year, compared to the S&P 500 at just 27%.
Climate policy took center stage during the U.S. elections. Additionally, the European Union (EU) sought to have roughly 20 % of its energy consumption from renewable sources in 2020.
It comfortably beat that benchmark by producing a massive 38% of its energy from renewables, overtaking coal and gas for the first time. As we advance, the larger renewable players with robust financial positioning and vertical integration are likely to move the industry. Let’s look at three such renewable energy stocks on the move:
Renewable Energy Stocks to Buy: NextEra Energy (NEE)
NextEra Energy is leading the way as the U.S utility industry marches forth in a cleaner direction. The country’s largest utility’s renewable power business generates a massive return of over 500% for its investors in the past decade.
Additionally, it has an incredible dividend history, with its five-year growth rate at 12.5%. Therefore NEE stock is one of the best renewable energy stocks currently in the market.
Covid-19 led shutdowns negatively affected the company’s growing Florida utility. However, it finished the year off well with a net income of $2.92 billion with revenues at roughly $18 billion despite the challenges.
Moreover, it commissioned 5800 megawatts of renewables projects, adding 7,000 megawatts to its backlog. One concerning element for investors has been its lofty valuation.
However, a lot of it is justified, with the company growing at a compound annual growth rate of roughly 8%, which comfortably trumps its competition. The stock has been falling in the past month, though, presenting an excellent buyable dip.
First Solar (FSLR)
Shares of Arizona-based solar energy solutions provider First Solar have grown by a remarkable 65% in the past year.
The company produces photovoltaic solar modules and solar power systems. It’s the front-runner in the ‘thin film’ technology, which uses cadmium telluride instead of silicon-panels to convert sunlight into energy.
Additionally, with its cost advantages, sustained demand, and the shift towards renewables, FSLR stock has an incredible outlook.
Naturally, the year had been inconceivably difficult for most companies in the sector as with First Solar. Despite the production disruptions, though, its earnings results remained stable with a healthy increase in profits.
It projects a substantial improvement in profits in 2021, with its EPS at $4.05-$4.75, above analyst estimates of $3.72. Its cost advantages are now paying off, and ongoing technological innovations continue to improve its outlook. Additionally, it is significantly low-priced across all major price metrics, which further adds to its attractiveness.
Enphase Energy, Inc. (ENPH)
Enphase Energy provides software-driven solutions primarily in the solar photovoltaic niche.
It is one of the most profitable and cash-flow generating players in the industry, with five-year average revenue growth of over 20%. Despite the Covid 19-induced headwinds, the company has proven to be resilient with considerable expansion in overseas revenues. ENPH stock has been on a phenomenal run in the past year, growing 180%.
It recently announced its fourth-quarter results, where revenue grew by 26% year-over-year to $264.8 million. Additionally, it has delivered an earnings beat in the past eight quarters.
It currently enjoys a duopolistic position in the U.S. Residential Solar market along with SolarEdge Technologies (NASDAQ:SEDG). With its superior microinverter technology, the company will continue to expand its market share in the industry.
Additionally, it should benefit from the Biden administration’s greener energy policies in the shape of tax credits and other regulatory incentives.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.