Owners of green energy stocks haven’t had much fun in the past year.
For example, the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN) — it tracks the performance of the Nasdaq Clean Edge Green Energy Index — is a collection of manufacturers, developers, distributors, and/or installers of clean-energy technologies. Its shares are down 33% over the past year.
Another ETF is the Invesco Solar ETF (NYSEARCA:TAN), as its name implies, invests in companies doing business in solar energy. Its 45 holdings are down 45% over the past year.
Lastly, the iShares Global Clean Energy ETF (NYSEARCA:ICLN), the largest of clean energy ETFs with $2.55 billion in net assets, invests in global equities involved in the clean energy industry. Its shares are down 33% over the past 52 weeks.
Together, these three ETFs have 206 holdings. I’ll recommend one from each of the three ETFs. The only catch? They have to be analyst-approved green energy stocks.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is the second-largest holding in QCLN. It’s an Arizona-based manufacturer of solar panels. There are 31 analysts covering its stock. Of those, 25 rate it outperform or buy, with a target price of $227.00, 53% higher than its current share price.
Like a lot of companies in green energy, business has become less certain, leading to revised guidance. However, when First Solar announced its Q3 2023 earnings at the end of October, it kept its net sales for 2023 at $3.5 billion at the midpoint of its guidance, with a $12 million increase in operating income, to $820 million.
“Since our last earnings call, we have made steady progress, establishing the foundations for our long-term growth journey, including investments in manufacturing and the infrastructure needed to rapidly evolve and scale our technology,” said Mark Widmar, CEO of First Solar.
In October 2020, I selected First Solar, along with nine other stocks that would ride the ESG (environmental, social, and governance) investing wave. Well, ESG’s gone in the toilet in the years since.
However, as I said back then, First Solar reclaims 90% of its glass and semiconductor materials from their solar panels. ESG or no ESG, that’s responsible manufacturing.
Shoals Technologies Group (SHLS)
Shoals Technologies Group (NASDAQ:SHLS) is the fifth-largest holding in TAN. It’s a Tennessee-based manufacturer of electrical balance of system (EBOS) solutions for energy projects. Essentially, its EBOS components carry the electric current from the solar panels to the inverter, which converts the direct current (DC) to alternating current (AC). From there, green energy goes out to the power grid.
Of the 18 analysts that cover its stock, 15 rate it a buy, with a target price of $24.00, 77% higher than its current share price. Shoals’ stock has lost 52% over the past year and 60% over the past five years. It’s due for a rebound.
In October, Goldman Sachs analysts upgraded its shares to buy from neutral, while also increasing their target price by a dollar to $28. The analysts’ rationale for the upgrade was three-fold. First, its margins should improve as its warranty expense issues get sorted. Second, it believes that growth in solar in the U.S. will be excellent in 2024. Finally, its valuation was at historical lows, trading at 20x its forward earnings per share.
Its shares have lost 23% of their value since then. Based on the average analyst estimate of $0.90 in 2024, its shares now trade at 15x earnings, even cheaper than in the fall.
It’s a long-term buy.
EDP Energias de Portugal (EDPFY)
EDP Energias de Portugal(OTCMKTS:EDPFY) is the seventh-largest holding of ICLN. There are 21analysts that cover its stock. Of those, 19 rate it outperform or buy, with a target price of $59.77, 29% higher than its current share price.
As the name suggests, it is an energy business that started as a utility in Portugal 40 years ago. Now it wants to produce 100% green energy by 2030, just six years from now. It’s not far off that mark with 85% renewable energy.
In the first nine months of 2023, it 3.83 billion euros ($4.17 billion) in EBITDA, up 25.6% from 3.05 billion euros ($3.32 billion).
The company’s 2023-2026 growth plan stated that it wants to invest 25 billion ($27.21 billion) euros over the four years, adding 4.5 GW (gigawatts) per year and more than 50 GW between 2021 and 2030. It will be coal-free by 2025, all green by 2030, and net zero emissions by 2040.
On the bottom line, it wants to grow its EBITDA to 5.7 billion euros ($6.2 billion) by 2026, leading to 1.45 billion ($1.58 billion) euros in net income.
It’s got an aggressive plan for green energy. I expect it will meet its goals, rewarding shareholders for their faith and patience.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
