Rising oil and gas prices amid supply constraints and concerns about climate changes have triggered a higher focus on green energy sources, including solar, wind, and hydropower. Governments across the world are allocating billions of dollars to accelerate the adoption of clean energy sources. In the U.S., the recently passed Inflation Reduction Act (IRA) allocates $369 billion for clean energy and climate change initiatives. Keeping in mind a favorable demand backdrop, we will discuss three green energy stocks – Plug Power (NASDAQ:PLUG), First Solar (NASDAQ:FSLR), and Brookfield Renewable (NYSE:BEP). With the help of TipRanks’ Stock Comparison tool, we’ll pit these stocks against each other to pick the one that can offer the most attractive returns.
Plug Power (PLUG)
A rising interest rate environment is detrimental to growth stocks like Plug Power. However, several analysts are looking beyond near-term pressures and disappointing Q2 results to focus on the long-term growth potential of Plug Power, a leading hydrogen fuel cell technology provider.
Even before this deal, the two companies have been collaborating, with Plug Power deploying over 15,000 fuel cells to replace batteries in forklifts in 70 Amazon distribution centers.
Given the growing demand for green hydrogen, Plug Power is focused on enhancing its capacity, with a goal to produce 70 tons per day by the end of this year. Moreover, the company is on track to produce 500 tons per day of green hydrogen in North America by 2025, and 1,000 tons per day worldwide by 2028.
Is PLUG Stock a Buy?
Truist Financial analyst Bronson Fleig feels that the Amazon deal is “a positive step” supporting Plug Power’s “aggressive green H2 ecosystem strategy through further backstopping of significant internal green H2 production.” Fleig reiterated a Hold rating on PLUG stock and a price target of $32.
Craig-Hallum analyst Eric Stine raised his price target for PLUG stock to $38 from $31 and reiterated a Buy rating. Stine feels that the supply agreement with Amazon further strengthens the relationship between the companies.
Overall, consensus among analysts is a Moderate Buy based on 12 Buys and six Holds. The average Plug Power price target of $35.83 implies nearly 50% upside potential. Shares are down 15.2% year-to-date.
First Solar (FSLR)
First Solar is well-positioned to benefit immensely from the incentives under the Inflation Reduction Act. The company recently announced its plans to invest up to $1.2 billion in boosting domestic production of photovoltaic (PV) solar modules. This investment will be mainly directed toward building a new factory in the U.S. Southeast with an annual capacity of 3.5 GWDC (gigawatts direct current).
First Solar’s continued investments in capacity expansion will enhance its ability to produce American-made solar modules to over 10 GWDC by 2025.
Coming to operating results, First Solar raised its full-year sales outlook following better-than-anticipated Q2 performance. However, the company lowered its full-year earnings outlook due to an asset impairment related to a legacy systems business asset in Chile and the devaluation of the Japanese Yen. On the positive side, First Solar stated that it ended Q2 with a record backlog of over 44 GWs, which extends the horizon for future expected deliveries to 2026.
Is First Solar a Buy or Sell?
Earlier this month, Goldman Sachs analyst Brian K. Lee double-upgraded First Solar to a Buy from Sell and increased the price target significantly to $170 from $60. Highlighting the company’s above-80% exposure to the U.S. market, Lee stated the company is poised to gain from demand tailwinds and is the most immediate beneficiary of manufacturing credits for solar companies under the Inflation Reduction Act.
Overall, First Solar scores the Street’s Moderate Buy consensus rating based on 12 Buys, five Holds, and one Sell rating. The average FSLR price target of $139.06 implies 5.5% upside potential. Shares have rallied 51% so far this year.
Brookfield Renewable Partners (BEP)
Brookfield is one of the leading renewable power companies. Its portfolio comprises hydroelectric, wind, solar, and storage facilities in North America, South America, Europe, and Asia. The company boasts about 23 GW of installed capacity. What’s more, it has nearly 75 GW of capacity in its development pipeline.
In the second quarter, Brookfield’s FFO (funds from operations) per unit increased about 10% year-over-year to $0.46 but marginally missed analysts’ expectations. FFO growth was driven by solid asset availability, higher power prices, and continued growth organically as well as through acquisitions.
The company continues to focus on its development activities and commissioned about 1,000 megawatts of new projects in the second quarter. These projects are expected to generate nearly $11 million of FFO per annum.
As part of its growth initiatives, the company has “deployed or agreed to deploy” $4.5 billion of capital across several key areas, including battery storage, carbon capture, utility-scale wind and solar, and distributed generation.
Is BEP a Good Stock to Buy?
Recently, J.P. Morgan analyst Mark Strouse increased his price target for Brookfield stock to $43 from $41 and maintained a Buy rating to reflect the favorable impact of the IRA.
With three Buys and two Holds, Brookfield Renewable has a Moderate Buy consensus rating. The average BEP price target of $39.36 suggests upside potential of 11.5%. BEP shares are down 1.2% year-to-date.
The significant investments being made by several governments as well as the rising adoption of clean energy are expected to drive long-term growth for green energy providers. Based on the higher upside potential, Plug Power seems to be a better pick than First Solar and Brookfield Renewable.
The growing use of hydrogen fuel cell systems in electric vehicles, supply chain, and logistics applications, and stationary power markets bodes well for Plug Power’s future.