3 Renewable Energy Stocks that Could Shine

Investors are evincing keen interest in renewable energy stocks.

Governments around the world are also pushing through for regulations that would reduce carbon emissions.

The U.S. Energy Information Administration (EIA) estimates that while global consumption of energy will rise by around 50% over the next 30 years, renewable energy sources, specifically solar and wind, will rise around the same level.

Using the TipRanks Stock Comparison tool, let’s compare three Top Green energy Stocks that analysts are bullish about.

Plug Power (PLUG)

Plug Power is a provider of hydrogen fuel cell turnkey solutions. The company had a very successful third quarter with the largest revenue in the company’s history. PLUG reported revenues of $144 million in Q3, up 34% year-over-year.

However, the company’s margins continued to remain under pressure. While the company’s gross margin improved sequentially quarter-over-quarter, it remained essentially flat at a negative 21.6%, after excluding one-time charges.

Plug Power’s margins are likely to remain under pressure until the end of this year due to rising delivery costs and an uptick in natural gas prices.

H.C. Wainwright analyst Amit Dayal is also of the opinion that margins will be under pressure for the next few quarters. The analyst acknowledged that business momentum for PLUG continued to be robust though, and has raised his revenue guidance for FY22 to be between $900 million and $925 million, versus his earlier estimate of $748 million.

Dayal also viewed the company’s focus on building out its hydrogen generation infrastructure and “accelerating green hydrogen equipment” positively. In light of this, the analyst believes that the company’s recent acquisition of Frames Group, a turnkey systems integration provider for $115 million “should support Plug’s goal to reach an installed electrolyzer capacity of three gigawatts (GW) by 2025.”

As a result, Dayal anticipates that as revenues rise, PLUG’s gross margins could be 23.9% next year and could reach 35% in 2029. What’s more, the analyst also expects Plug Power to turn profitable and “begin generating operating profits in 2023E.”

The analyst reiterated his bullish stance with a Buy rating and set a PLUG price target of $78 with a 128.3% upside potential.

Other Wall Street analysts echo Dayal with a Strong Buy consensus rating on Plug Power based on 13 Buys and four Holds. The average Plug Power price target of $48.29 implies 41.4% upside potential to current levels.

Enphase Energy (ENPH)

Enphase Energy is a supplier of micro inverter-based solar and battery systems. Even after its solid Q3 results, shares of the solar system supplier have inexplicably tanked 6.4% in the past month.

In Q3, the company’s revenues surged 11% year-over-year to $351.5 million, even as it navigated supply constraints and logistical difficulties. Analysts were anticipating revenues of $343.09 million.

Enphase’s adjusted diluted earnings doubled year-over-year from $0.30 to $0.60 per share in Q3, surpassing analysts’ estimates of $0.48 per share.

Wells Fargo analyst Praneeth Satish also took note of Enphase’s strong results and initiated coverage on the stock late last month. The analyst pointed out a number of key positives for the stock. These include “the continued expansion of the residential and commercial solar market [and] higher battery attach rates over time.”

Elaborating further, Satish pointed out that while he expects ENPH to retain its market share in the residential market, there is also a potential for significant growth due to new business opportunities. This includes “small-scale commercial microinverter, portable power, and EV chargers.”

The analyst added that extreme weather events could lead to rising power outages. This could fuel the demand for inverters that could be paired with battery storage, leading to homeowners operating independently off the grid.

According to Satish, this could provide ENPH “with opportunities to leverage both software and hardware innovations to drive more growth, higher margins and profitability.”

Moreover, Satish believes that “the decentralization of energy production” and a key competitive advantage provided by the National Electrical Code (NEC) 2017 regulation that “creates barriers to entry in the US market” could benefit Enphase Energy.

As a result, the analyst is upbeat about the stock with a Buy rating and a price target of $313 on the stock with an upside potential of 44.3%. (See more: ENPH price target)

Rest of the Street is also bullish about Enphase Energy with a Strong Buy consensus rating based on 15 Buys and two Holds. The average Enphase Energy price target of $266.12 implies 22.9% upside potential to current levels.

General Electric (GE)

General Electric was in the news recently, as the conglomerate announced that it was going to split into three public companies. These include GE Aviation, GE Healthcare, and a combined entity that would consist of GE Renewable Energy, GE Power, and GE Digital businesses.

While the company intends to execute a tax-free spinoff of GE Healthcare in early 2023, it intends to spin off the combined business of GE Renewable Energy, GE Power, and GE Digital in early 2024. GE intends to retain a 19.9% share in GE Healthcare following the spinoff.

Following these spinoffs, GE will be focused purely on aviation. Will this business transformation story be a success?

Jeffries analyst Saree Boroditsky thinks that while splitting up will result in more transparency for the business segments, making these businesses more accountable, it will also provide GE with “strategic optionality.”

That said, the analyst also believes that with the stock currently hovering around a stock price of $97, it is already reflecting the potential upside to the stock. Boroditsky’s sum-of-the-parts (SOTP) valuation supports a stock price of $100 (2.8% upside).

As a result, Boroditsky is sidelined on the stock with a Hold rating.

Furthermore, the analyst is of the view that when it comes to its power business, earnings could be limited as a broader push towards net zero emissions could result in falling demand for natural gas. This decline in the Power business is unlikely to be offset by GE’s Renewables business, according to Boroditsky.

The analyst acknowledged that government support and a broader focus globally on decarbonization could result in renewable markets growth over the long term. However, despite the momentum in revenues, the analyst expects that GE’s renewables business will “take time for the business to contribute to earnings.”

Boroditsky also perceives certain headwinds to the management’s aim of achieving “mid-single-digit margins by 2023” for its renewables business due to “cost inflation and long-term risk from the dominant position of Chinese OEMs [original equipment manufacturers].”

However, rest of the Wall Street analysts are cautiously optimistic about GE with a consensus rating based on eight Buys and five Holds. The average GE price target of $119.15 implies 22.6% upside potential to current levels.

Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.