4 Reasons to Invest in Renewable Energy Stocks
Renewable energy stocks have been on fire over the past six months asinvestors have realized the potential of this disruptive energy industry. Butthe transition to renewable energy has been taking place for years.As the cost to build wind and solar power plants has come down and theirefficiency has gone up, we’ve seen them replace coal, nuclear, and in somecases even natural gas power plants. Those trends should continue, which leadsus to four big reasons to invest in renewable energy.Image source: Getty Images.
Best solar stocks to invest in
The solar energy market is accelerating. According to the National RenewableEnergy Laboratory, the industry will add 10 gigawatts (GW) of new solarcapacity annually through 2022. That should increase to an average of 18 to 20GW per year in the 2023-2030 timeframe. Powering that surge is a dramaticdecline in costs. Amazingly, solar is on track to be the lowest-cost source ofbulk power in the coming years.While several large companies focus on solar energy and should benefit fromits expansion, not all of them have strategies designed to increase value fortheir shareholders. However, these three companies seem most worthy ofinvestors’ consideration:
Solar energy’s future has never looked brighter
Solar energy was already on track for significant growth before the electionof Joe Biden as the country’s 46th president. However, with his pledge to putthe U.S. on a path toward an emissions-free future, the new administrationcould supercharge the sector’s expansion. He set a bold goal for the U.S. togenerate 100% carbon-free electricity by 2035. The president is proposingextending tax credits and making direct investments to accelerate the shift toclean energy.If Biden’s plan passes Congress, the solar industry could grow even faster inthe coming years than current projections suggest. That’s why investors shouldconsider investing in solar energy stocks. First Solar, Brookfield Renewable,and SolarEdge Technologies stand out as being among the best options, thanksto strong financial profiles and visible growth outlooks.
Is solar energy a good investment?
The solar energy market is accelerating. According to the National RenewableEnergy Laboratory, the industry will add 10 gigawatts (GW) of new solarcapacity annually through 2022. That should increase to an average of 18 to 20GW per year in the 2023-2030 timeframe. Powering that surge is a dramaticdecline in costs. Amazingly, solar is on track to be the lowest-cost source ofbulk power in the coming years.
What are the best solar energy companies to invest in?
These three companies seem most worthy of investors’ consideration:First Solar: Manufactures thin-film solar panels.Brookfield Renewable: Operates solar-energy-generating facilities, wind farms,and hydroelectric power plants.SolarEdge Technologies: Manufactures power optimizers for solar panels.
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Loop Energy (TSE:LPEN) – A new industry player
Shifting gears from one of the most widely known, to likely one of the leastknown. Loop Energy (TSX:LPEN) is a newly listed company having only gonepublic on February 25, 2021. Loop designs PEM fuel cell systems targeted forthe electrification of commercial vehicles.The demand for its IPO was quite strong and it priced at the top end ofexpectations – $16.00 per share and it touched a high of $17.44 on its firstday of trading. Fortunately for management, the IPO’s was at peak investordemand for hydrogen stocks. Unfortunately for investors, those who bought inthe early stages of its listing are likely sitting on big losses.Since its IPO, Loop Energy’s stock price has cratered and it has lost ~56% ofits value.While the downtrend is unnerving, it is a result of negative industrysentiment. This has nothing to do with the company‘s performance or itsproducts. In fact, we quite liked the company when it launched its IPO as itwas much more attractively valued than the competition. As mentioned however,the markets soured on the industry and valuations cratered across the board.Much like Ballard, it is focused first and foremost on commercial applicationsincluding light commercial vehicles, transit buses, medium and heavy dutytrucks, marine, train, mining trucks, material handling vehicles, andstationary power.Unlike Ballard, Loop Energy is a pre-revenue stage company. It has only begunmarketing its products and expects to exit 2022 with $13.9M in sales – up fromonly $353K in 2020. It believes it can achieve long-term CAGR of approximately40% through 2030. That is an impressive growth trajectory.Whether it can achieve this level of growth remains to be seen and as a newlylisted company, management has not yet demonstrated its ability to execute.The good news is that the company is successfully growing the backlog.In 2020, Loop exited the year with a $3.2M backlog. When it went public, thatbacklog increased to $16.4M and as of last update (April, 2021), the backlogstood at $37.6M. Of note, the company’s backlog refers to projected sales overthe next 24 months.Analysts seem to be on board and are calling for 200%+ average revenue growththrough 2023. Assuming the company hits revenue estimates, Loop is onlytrading at ~4 times Fiscal 2022 sales. In comparison, Ballard is trading at~37 times Fiscal 2022 sales. Much like it was at IPO, there is no questionthat Loop Energy is cheap by comparison.What makes Loop particularly attractive is that it is backed by Cummins, a$34B global industrial giant. This strategic partnership will enable Loopeasier entry into a multitude of markets.While the potential looks attractive, Loop Energy is likely to be even morevolatile than Ballard. It is a newly listed company and Loop will be undergreater scrutiny than its more established competitor.Well executed business by the company and Loop looks like a bargain at theseprices. On the flip side, if it struggles to meet expectations then investorsare likely going to require considerable patience.