The analyst says the extension of PTC (production tax credits) represents an overall positive for onshore wind. However, with an extension of the ITC (investment tax credits) and its expansion to clean energy storage, the analyst considers it “more of an upside surprise for solar/storage,” where GE has “virtually no exposure.”
While the addition of a “direct pay” aspect makes the funding mechanism better, it also supports the “scaling of utility scale battery technologies and development of distributed resources.”
Basically, what this means, is that the increasing presence of EVs will assist in scaling batteries/storage, which in turn could hasten the use of solar as the “disruptive killer app.”
“This not only will continue to challenge conventional resources such as gas and the related aftermarket,” Tusa says, “But, in comparison to some wind disciplines, most notably offshore, this type of distributed resource looks like it could ultimately end as the most flexible, lowest cost source.”
As far as the Biden Administration’s offshore wind plan, the program targets capacity of 30 GW by 2030. Tusa assumes GE will be “entitled” to 1 GW/year.
In order to meet the target, a big investment is required. At $12 billion a year, or $4 billion per GW, the expenses for hitting the target are “surprisingly high,” which to Tusa, “raises questions about the economics of wide scale adoption.”
“In other words,” the analyst summed up, “US offshore does not look to us like a silver bullet/investable theme on its own for GE and renewables upside is more than offset by conventional declines and potential challenges from solar/storage.”
All in all, there’s no change to Tusa’s Neutral (i.e. Hold) rating and $5 price target for GE shares. It’s a sharp 62% decline from current levels. (To watch Tusa’s track record, click here)
The rest of the Street has a more upbeat take; considering the $13.50 average price target, most feel the stock is currently fairly valued. Rating wise, the analysts are cautiously optimistic; based on 8 Buys and 5 Holds, the stock boasts a Moderate Buy consensus rating. (See GE stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.