Green energy stocks offer investors the best of both worlds: companies that can be great long-term investments that also care about the future of our environment. This sector focuses on companies that create cleaner energy using environmentally friendly and usually renewable resources. These include solar, wind, hydro and even geothermal heat. These companies may also promote the use of products that use cleaner energy sources and may also provide alternatives to current environmentally unfriendly options.
The green energy sector has grown at a rapid rate as governments and corporations begin to adapt to concerns over climate change. In 2023, it is estimated that more than $1.7 trillion was spent worldwide on clean energy initiatives and infrastructure. Green energy is not only a safer alternative, but it is becoming a more economical source of energy as well. Here are three green energy stocks that we have identified that are worth watching over the next quarter.
NextEra Energy Inc (NEE)
NextEra Energy Inc (NYSE:NEE) is the world’s largest producer of both solar and wind energy and was founded in 1925. This company is the eighth-largest energy company by market cap in the world and the fourth-largest American energy company. According to Yahoo Finance, 13 of the 15 analyst ratings released in March for NEE have been a Buy or Strong Buy.
Despite such good analyst coverage, this green energy stock has traded flat so far in 2024 and is down ~18% over the past 52 weeks. Looking at its financials however, we see that NextEra has continued its strength, and recently increased its quarterly revenue by $7 billion YoY. Earnings per share have also grown at a nearly 10% CAGR since 2012. On top of that, NextEra has a ten-year dividend growth CAGR of 9.87%.
Valuation-wise, NextEra trades at about 4.5x sales with a forward P/E ratio of 18x. It also has strong institutional ownership of more than 81%. Even though NextEra’s stock price has underperformed in 2024, we remain confident in it as an excellent long-term investment.
First Solar Inc (FSLR)
First Solar Inc (NASDAQ:FSLR) is one of the world’s largest producers of solar panels. It is the sixth-largest renewable energy company in the world and the second-largest American company next to NextEra Energy. Despite the fact that First Solar’s stock is currently trading below its bottom one-year price target range, analyst optimism remains with a projected high target of $359.
The solar industry has been hit hard by the higher interest rate environment and First Solar is no exception. Speaking more broadly about its future growth, First Solar has been expanding operations and expects to see a new facility in Louisiana by 2026. Contract operations like these remain strong and stable in the long term, and First Solar has guaranteed orders through 2030.
First Solar’s stock decline means it is trading at an attractive valuation. Shares are trading at just 11.3x forward earnings and 4.96x sales. Additionally, net income for the company continues to stay strong at nearly a 42% five-year CAGR! It should only be a matter of time until First Solar’s stock recovers from this overdone sell-off.
Rivian Automotive Inc (RIVN)
Rivian Automotive Inc (NASDAQ:RIVN) is an American EV maker that was founded in 2009 by current CEO RJ Scaringe. The stock has taken a beating this year and is trading nearly 45% lower than the Yahoo Finance average price target of $19.04.
Rivian recently announced that its R2 and the R3 models aren’t expected to be on the road until 2026 at the earliest. Still, Rivian is following a similar path to Tesla which saw exponential growth following the release of its Model 3 and Model Y. The mass market models should benefit Rivian and until then, it should be able to survive on its partnerships.
Rivian is not yet a profitable company which makes using earnings a difficult measurement for value. After this year’s decline, the stock is now trading at just 2.3x sales which is cheap compared to Tesla’s stock which still trades at 6.15x sales. However, assuming a reversion to the mean, taking an entry at Rivian provides a risk/return skewed to the upside into 2026!
On the date of publication, Ian Hartana and Vayun Chugh did not hold (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.
