Renewable energy is being adopted in a big way in the United States, as businesses pursue plans to decarbonize. According to a Deloitte report, citing data from the U.S. Energy Information Administration (EIA), electricity consumption is likely to go up by 1.3% this year.
The United States is preparing to adopt a set of new energy policies that aim to halve its greenhouse emissions by 2035. The U.S. has already embarked on this as earlier this month, U.S. President Joe Biden signed an executive order that intends to make 50% of all new vehicles sold in the United States electric by 2030, in order to reduce greenhouse gas emissions.
Using the TipRanks stock screener, let us look at some renewable energy stocks with an upside potential.
The author is neutral about all the stocks listed in this article.
Enphase Energy (NASDAQ: ENPH)
Enphase Energy is an energy technology company that delivers micro inverter-based solar-plus-storage systems connecting solar generation, storage, and energy management on a single platform.
In Q2, the company reported revenues of $316.1 million, a jump of 152% year-over-year with a gross margin of 40.4%. Adjusted diluted earnings came in at $0.53 per share, more than double the adjusted EPS of $0.17 in the same period last year.
The rise in revenues was driven as the demand for the company’s microinverter systems outstripped supply.
In Q3, ENPH expects revenues to be in the range of $335 million to $355 million, which includes “shipments of 60 to 70 megawatt hours of Enphase Storage systems.” (See Enphase Energy stock chart on TipRanks)
Needham analyst Vikram Bagri pegged the Q3 guidance as “slightly stronger than expected primarily due to an uptick in storage sales.” The analyst added that the company’s management is optimistic “that supply will improve in 3Q as more sources are added” and it “has a clear line of sight into battery system sales as they’re fully booked for 3Q.”
The analyst believes that “strong growth lies ahead [for the company] with the rollout of new products, introduction of additional storage features, international expansion and growing manufacturing capacity.”
Analyst Bagri reiterated a Buy rating and a price target of $195 (12.8% upside) on the stock following the Q2 results.
Furthermore, when it comes to the sentiment among 24 bloggers, it is 95% bullish as compared to the sector average of 71%.
Turning to the rest of the Street, consensus is that Enphase Energy is a Moderate Buy, based on 8 Buys and 4 Holds. The average Enphase Energy price target of $206.33 implies an approximately 17.9% upside potential from current levels.
NextEra Energy Partners (NEP)
NextEra Energy Partners has headquarters in Juno Beach, Florida, and is a limited partnership formed by NextEra Energy (NEE). The company acquires, manages, and owns contracted clean energy projects and has interests in wind and solar energy projects in the United States.
In Q2, NEP reported cash available for distribution (CAFD) of $151 million and adjusted EBITDA of $350 million.
Jim Robo, Chairman and CEO of NextEra Energy Partners, said, “Today, we are announcing the acquisition of an approximately 590-megawatt net interest in a portfolio of geographically diverse wind and solar projects from NextEra Energy Resources [for $563 million] and view this attractive acquisition as another step in our plan to expand and diversify the partnership’s portfolio.”
Robo added, “With continued access to low-cost capital and accretive acquisition opportunities, NextEra Energy Partners is as well-positioned as ever to grow limited partner distributions per unit by 12% to 15% through 2024.” (See NextEra Energy Partners stock chart on TipRanks)
The company also announced a “quarterly distribution of $0.6625 per common unit (corresponding to an annualized rate of $2.65 per common unit) to the unitholders of NextEra Energy Partners.” This would be payable on August 13 to unitholders of record as of August 5.
NEP has delivered a dividend yield of around 3.2%, which is closer to the sector average of 3.3%, when it comes to dividends. The company has a dividend payout ratio of 76.2%. Dividend payout ratio is the ratio of total dividends paid by the company relative to its net income.
NEP continues to expect a run rate for adjusted EBITDA to be at the upper end of its range of $1.44 billion to $1.62 billion and CAFD to be at the upper end between $600 million to $680 million.
Following the Q2 results, Oppenheimer analyst Colin Rusch pointed out that while the Q2 EBITDA remained “below expectations due to lower natural resource availability during the quarter, the long-term performance of its portfolio remains highly predictable.”
The analyst reiterated a Buy and a price target of $95 (19.4% upside) on the stock. Rusch was of the opinion that “NEP is a key beneficiary of renewables growth as well as access to low-cost capital. We continue to see NEP as a core holding of climate change mitigation portfolios with a healthy mix of underlying cash flow and early technology adoption exposure with a best-inclass ESG process.”
Turning to the rest of the Street, consensus is that NextEra Energy Partners is a Moderate Buy, based on 5 Buys and 2 Holds. The average NextEra Energy price target of $85.71 implies an approximately 7.1% upside potential from current levels.
Beam Global (NASDAQ: BEEM)
Beam Global, formerly Envision Solar, is a producer of patented infrastructure products for electric vehicles (EV) including EV charging, energy security, and outdoor media.
The company recorded the second-highest quarterly revenue in the company’s history with revenues of $2.1 million, a jump of 41.2% year-over-year. However, BEEM’s net loss widened to $1.6 million in Q2 from $0.8 million in the same quarter of last year.
In the second quarter, the company’s sales pipeline grew 50% year-over-year to $75 million. During Q2, BEEM also received its largest single order so far from California’s Department of General Services (DGS) for 52 systems. (See Beam Global stock chart on TipRanks)
H.C. Wainwright analyst Amit Dayal believes that the rise in sales pipeline will give BEEM “more shots on the goal of converting this into the backlog. We believe COVID-19 related headwinds still present a challenge, but the company is witnessing order activity from private enterprises as well as state and local governments.”
The top-ranked analyst on TipRanks remained sidelined on the stock, with a Hold rating, following the Q2 results.
Interestingly, the Investor sentiment remained very negative about the stock, with 1.6% of all top investors’ portfolios analyzed by TipRanks offloading the stock in the past seven days. However, Hedge Fund activity is up by 2,500 shares in the last quarter.
Turning to the rest of the Street, consensus is that Beam Global is a Moderate Buy, based on 3 Buys and 2 Holds. The average Beam Global price target of $43.33 implies an approximately 55% upside potential from current levels.
Clearway Energy Inc. (CWEN)
Clearway Energy is a large owner of renewable energy in the United States, with around 4,700 net MW of installed wind and solar generation projects.
Recently, the company announced an agreement to acquire the remaining 50% equity interest in the Utah Solar Portfolio for $335 million. That consists of seven utility-scale solar farms in Utah with a capacity of 530 Mega Watt (MW).
In Q2, CWEN reported adjusted EBITDA of $365 million and Cash Available for Distribution (CAFD) of $155 million. However, the company’s net income reduced from $76 million in the same period of last year to $32 million.
Christopher Sotos, Clearway Energy’s President and CEO said, “In regard to the Company’s long-term outlook, we continue to focus on the re-contracting of the California natural gas assets with further progress expected in the third quarter…Clearway continues to be well positioned to achieve its 5% to 8% annual dividend growth objective over the long-term.”
On July 23, the company declared a quarterly dividend of $0.3345 per share, payable on September 15 to shareholders of record as of September 1.
CWEN reiterated its CAFD guidance of $325 million for FY21. (See Clearway Energy stock chart on TipRanks)
Following the Q2 results, Evercore ISI analyst Durgesh Chopra remained sidelined with a Hold rating, with a price target of $25 (21% downside) on the stock. The analyst remarked that the company “continues to work on renegotiation/marketing their gas contracts in CA (~9% of total cash flow) set to expire in 2023; expect further progress in 3Q21.”
According to analyst Chopra, CWEN is also currently in the process of evaluating the potential divestiture of its thermal platform, which could result in net proceeds of $800 million. The analyst added, “The company is intent on a transaction that is accretive to CAFD per share, as well as one that is attractive from an IRR [internal rate of return] and NPV [net present value] perspective, and keeps the balance sheet strong.”
According to the TipRanks Smart Score system, based on 8 unique data sets, the stock scores an 8 out of 10, indicating that the stock is highly likely to outperform the market. Corporate Insiders are also positive about the stock, with insiders having bought around $632 thousand worth of shares in the past three months.
Turning to the rest of the Street, consensus is that Clearway Energy is a Hold, based on 1 Buy and 3 Holds. The average Clearway Energy price target of $31.50 implies an approximately 1% downside potential from current levels.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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