President Joe Biden’s Build Back Better Act – which allocated hundreds of billions of dollars to clean energy investments and tax incentives – has yet to make it out of the Senate and its prospects look bleak. Still, the future for green energy stocks is looking bright.
For starters, an executive order signed by Biden in early December is designed to boost America’s clean energy economy through sustainability efforts at the federal level. Among the initiatives outlined in the order is a pledge by the White House to ensure the U.S. government will have “net-zero emissions from overall federal operations by 2050.”
Obviously, that’s a lofty goal for any organization, much less one as large as the U.S. government. But we’re not the only country going green.
“Renewables are set to account for almost 95% of the increase in global power capacity through 2026,” according to a report from the International Energy Association (IEA). “The amount of renewable capacity added over the period of 2021 to 2026 is expected to be 50% higher than from 2015 to 2020.” China and India are leading the clean energy charge, but America and Europe are “on track to speed up significantly from the previous five years,” the report says.
And in its 2022 Renewable Energy Outlook, Deloitte says, “Renewable energy growth is poised to accelerate in 2022, as concern for climate change and support for environmental, sustainability and governance considerations grow and demand for cleaner energy sources from most market segments accelerates.”
Suffice it to say, green energy is one sector where many investors could be looking for significant growth in 2022 and beyond.
With that in mind, here are 10 of the best green stocks for investors looking to profit on the growing trend toward sustainability. Included in the list are names from a variety of sectors and industries and all are well-liked by the analyst community.
Share prices and other market data as of Feb. 16. Average price targets and analyst ratings provided by market data tool Koyfin.
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AlbemarleGetty Images
Sector: MaterialsIndustry: ChemicalsMarket value: $28.8 billionConsensus analyst rating: Buy (23 analysts)Worldwide electric vehicle (EV) sales are “now up over 100% year-on-year versus the last year,” said Eric Norris, Albemarle’s (ALB, $246.00) lithium division president, at Deutsche Bank’s 6th Annual Lithium and Battery Supply Chain Conference. And “in countries like China, it’s 200%.”
Obviously, for a company that earns over $1.1 billion from lithium sales alone, that bodes well for ALB’s prospects. Especially when you consider today’s $208.9-billion EV market is expected to reach more than $957.4 billion by 2030, according to global research firm Market Research Future. That adds up to a compound annual growth rate (CAGR) of 24.5%.
And that’s why in a recent analyst report, Argus Research’s Bill Selesky (Buy) says his organization looks for Albemarle to be “a major beneficiary” of lithium market growth, which he projects to be around 30% CAGR between 2021 and 2025.
In fact, in the company’s Nov. 4 earnings call, CEO Kent Masters says the company already saw “net sales of $831 million and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] of $218 million” in its third quarter. Although EBITDA remained relatively flat on a year-over-year basis, that’s an 11% improvement in sales.
And ALB reported higher-than-expected revenue and earnings in its fourth quarter. While the stock tumbled in reaction to concerns over higher than previously forecast costs, this post-earnings pullback may have created an opportunity to buy one of the best green energy stocks at a discount.
CFRA Research Richard Wolfe called the post-earnings drop an “overreaction,” and maintained his Buy rating. “Despite input cost and supply-chain headwinds, we remain bullish in an environment where lithium demand is strong and ALB is expanding its capacity, all while lithium prices remain elevated, supporting strong EBITDA growth,” he writes.
Wolfe is in good company. Two surveyed analysts rate ALB a Strong Buy, 10 call it a Buy, seven say it’s a Hold and two rate it as a Sell and Strong Sell, respectively. Koyfin’s consensus rating on ALB stock is a Buy.
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Enphase EnergyGetty Images
Sector: Information technologyIndustry: Semiconductors & semiconductor equipmentMarket value: $20.6 billionConsensus analyst rating: Buy (27 analysts)Enphase Energy (ENPH, $154.03) sells solar products to be used in individual homes. By employing the company’s microinverters, homeowners can convert solar energy for their own personal use. Then, with the company’s proprietary technologies, Enphase Energy offers homeowners monitoring and control services. Enphase Energy even offers AC battery storage for excess energy generated during sunlight hours.
Of course, this focus on solar bodes well for ENPH’s prospects. Over the next six years, the solar market is expected to grow at a CAGR of 6.9%, according to market research firm Fortune Business Insights. This should bring it from a $184.0 billion industry today to a $293.1 billion industry by 2028.
According to Needham’s Vikram Bagri (Buy), potential revenue per home for Enphase Energy could grow from $9,000 today to $12,000 in just a few short years. And when you figure Enphase Energy has already installed its microinverters on more than 1.7 million homes, that means by 2024 ENPH revenue could easily grow by more than $5 billion.
Not to mention, “Stronger-than-expected growth in the U.S. residential solar market and/or more rapid market share gains in the U.S. would provide faster revenue growth,” Bagri says.
Analysts certainly think ENPH is one of the best green energy stocks out there. Of the 27 surveyed by Koyfin, six rate it a Strong Buy, 11 call it a Buy and 10 believe it’s a Hold. That’s enough for Koyfin to give shares an overall Buy rating. Koyfin’s surveyed analysts also see a potential 46.2% return over the next 12 months.
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MP MaterialsGetty Images
Sector: MaterialsIndustry: Metals & miningMarket value: $7.8 billionConsensus analyst rating: Buy (10 analysts)MP Materials (MP, $43.99) deals in the mining and processing of rare earth elements. Of course, mining of any sort isn’t usually considered the cleanest of all industries. However, not only do MP Materials’ products wind up in a multitude of clean energy solutions, MP Materials believes their Mountain Pass mine “is the world’s cleanest, most environmentally conscious rare earth facility” in the world.
Rare earths are 17 different minerals that are used in a host of contemporary applications. But as far as their green energy value goes, they’re absolutely essential for the production of electric vehicle batteries and wind-power turbines. And MP Materials’ mine at Mountain Pass is the only active rare earth mine in the U.S.
“MP is a rare, strategic and sustainable asset that investors interested in the EV transformation should strongly consider,” say Baird analysts Ben Kallo and George Gianarkis (Outperform, the equivalent of Buy). Especially when you consider that the rare earth industry is expected to grow at a CAGR of 12.3% through 2026. That means the industry could expand from a $5.3-billion market in 2021 to a $9.6-billion market in just five years.
Of the 10 analysts surveyed by Koyfin, two rate MP a Strong Buy, five say it’s a Buy, two call it a Hold and one has it a Sell. That’s enough for Koyfin to rate the stock as an overall Buy.
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NextEra EnergyGetty Images
Sector: UtilitiesIndustry: Electric utilitiesMarket value: $147.6 billionConsensus analyst rating: Buy (20 analysts)With a $147.6 billion market cap, NextEra Energy (NEE, $75.23) is one of the world’s largest utility companies. And they have green energy covered.
In addition to fossil fuels, the company generates electricity for its customers through solar, nuclear and wind. In fact, NEE recently filed a proposal to minimize environmental impacts in providing offshore wind energy to New Jersey while simultaneously keeping the energy source cost-effective.
UBS analysts Daniel Ford and Ross Fowler (Buy) see “significant capital expenditure around the transmission needs for offshore wind in New Jersey.” They “believe the total capital expenditure opportunity is in the 10-figure range.”
Argus analyst Angus Kelleher-Ferguson (Buy) says “NextEra remains a leader in renewable investments.” Kelleher-Ferguson goes on to say, third quarter, where NEE saw year-over-year earnings growth of nearly 12%, was “the strongest quarter for renewable origins in company history.”
Overall, six of the 20 analysts surveyed by Koyfin rate the company a Strong Buy, eight say it’s a Buy, five call it a Hold and only one deems it a Strong Sell. That’s enough for Koyfin to consider NEE an overall Buy. Plus, the analysts surveyed project a 12-month price target of $93.38. That’s a 24.1% increase from where NEE stock is at today.
What’s more, NEE has roughly 181 million shares in more than 200 different U.S. exchange-traded funds (ETFs) with a market value of over $22.1 billion. The largest ETF holder of NEE shares is the Utilities Select Sector SPDR Fund (XLU), with approximately 27.7 million shares held.
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ON SemiconductorGetty Images
Sector: Information technologyIndustry: Semiconductors & semiconductor equipmentMarket value: $27.3 billionConsensus analyst rating: Buy (30 analysts)ON Semiconductor (ON, $63.11) stock has been on a tear. The company reached a 52-week high of $71.26 on Jan. 4. That’s after bottoming at $8.17 during the March 2020 selloff. And that adds up to a 772% return in just over 21 months. Many investors are now wondering what’s going so right for this chipmaker.
For starters, ON has beat consensus earnings estimates for the past seven quarters. In fact, in its most recent report in early February, the company posted record quarterly revenue of $1.85 billion and year-over-year adjusted earnings per share (EPS) growth of nearly 250%. This led to a one-day 6% jump in ON’s share price.
In addition, on the company’s Feb. 7 earnings call, CEO Hassane El-Khoury announced ON has signed deals for committed revenue of $2.6 billion through 2024. And as far as green energy investments go, El-Khoury goes on to note that “over 70% of this committed revenue is for electric vehicle traction applications .”
Not to mention, ON’s inverter systems help convert the sun’s energy to usable electricity in solar panels. And with the world’s solar needs expected to grow at a CAGR of 6.9% through 2028, this too could bode well for ON’s prospects.
It’s no surprise that of the analysts surveyed by Koyfin, four rate the company a Strong Buy, 16 a Buy, eight a Hold and two a Strong Sell. Put it all together and that adds up to an overall Buy recommendation from Koyfin.
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StemSTEM
Sector: IndustrialsIndustry: Electrical equipmentMarket value: $1.7 billionConsensus analyst rating: Buy (5 analysts)With a $1.7 billion market value, Stem (STEM, $11.40) is the smallest of the green energy stocks on this list. The company didn’t begin trading on the New York Stock Exchange until April 29, 2021. But even though it went public less than a year ago, almost 12 million shares of the stock are held in 37 different ETFs, the largest of which is the iShares Russell 2000 ETF (IWM), which owns about 2.6 million shares.
Stem provides artificial intelligence (AI)-driven clean energy storage solutions. The company delivers and operates smart batteries to help build a stronger, more resilient energy grid. This, in turn, reduces carbon emissions.
Stem’s recent acquisition of AlsoEnergy gives the company “an improved one-stop-shop solution and strong cross-selling opportunities,” says Susquehanna analyst Biju Perincheril (Positive, equivalent of Buy). AlsoEnergy currently offers software, grid edge monitoring and other services to solar power owners and operators.
Even before the acquisition, STEM was showing solid growth. In its third quarter, the company posted record revenues of $39.8 million, +334% year-over-year. At the same time, Setm also swung to a net profit from the prior year’s loss. The strong results led to a 7.7% one-day jump in share price.
Given it’s a relative newbie on Wall Street, the stock isn’t widely covered by analysts yet. However, of the five analysts surveyed by Koyfin, two rate STEM a Strong Buy, two say it’s a Buy and one rates it a Hold. The surveyed analysts project a 12-month average price target of $33.20. That’s a one-year projected return of 191.2%.
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WolfspeedGetty Images
Sector: Information technologyIndustry: Semiconductors & semiconductor equipmentMarket value: $13.0 billionConsensus analyst rating: Buy (16 analysts)Wolfspeed (WOLF, $105.40) was founded in 1987, and was formerly known as Cree. The company changed its name in October 2021 as a result of the company selling its LED business and shifting the organization’s core operations to the production of silicon carbide materials and semiconductor devices. These chips are now being used in a number of clean energy applications, including electric vehicles and solar power.
This means WOLF is also taking advantage of solar’s growth from a $184.0 billion industry today to a $293.1 billion industry by 2028. Another reason it’s one of the best green energy stocks going forward: It’s also trying to cash in on the EV market growing from a $208.9 billion market in 2021 to a $957.4 billion market by 2030.
And the proof is in the pudding. In its fiscal second quarter ended Dec. 26, the company saw 36% year-over-year revenue growth.
“We delivered strong revenue at the high end of our guidance during the quarter, our sixth straight quarter of revenue growth, further validating our positioning to capture accelerating demand,” said Gregg Lowe, CEO of Wolfspeed. “The team is successfully growing and converting opportunities in our device pipeline.”
Wall Street pros are upbeat about Wolfspeed’s prospects too. Analysts surveyed by Koyfin project a 16.3% potential return on WOLF over the next 12 months.
And of the 16 analysts surveyed, two say it’s a Strong Buy, four call it a Buy, seven rate Wolfspeed a Hold, one has it at Sell and two believe it’s Strong Sell. That’s enough for Koyfin to consider the stock an overall Buy.
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AmerescoGetty Images
Sector: IndustrialsIndustry: Construction & engineeringMarket value: $2.9 billionConsensus analyst rating: Strong Buy (13 analysts)Ameresco (AMRC, $55.78) offers renewable energy products and services. As of Dec. 31, 2020, the company owned and operated 130 small-scale renewable energy plants and solar integrated-photovoltaic installations. In addition to its utility services, AMRC’s systems serve everything from airports and commercial and industrial installations to federal government, healthcare, schools and public housing.
“The company’s foray into utility-scale battery storage solutions presents a large long-term growth opportunity to capitalize on the fundamental shift toward clean and resilient energy generation occurring across all levels of energy infrastructure,” says William Blair analyst Tim Mulrooney (Outperform).
And Baird analysts George Gianarikas and Ben Kallo (Outperform) say AMCR “appears poised to perform well,” even with the Build Back Better bill likely scuttled. One potential growth catalyst will be that executive order signed by Biden in early December.
But the company is already posting notable growth, and for the full fiscal 2021, analysts are projecting 17.2% revenue growth and a 20.3% increase in earnings per share. Looking out to fiscal 2022, revenue is expected to rise another 47.5% and earnings are forecast to jump 31.7%.
Of the 13 analysts surveyed by Koyfin, one considers AMRC a Strong Buy, nine say it’s a Buy and three rate it a Hold. That’s enough for Koyfin to consider Ameresco one of the best green energy stocks, with an overall Strong Buy. And with a 12-month price target of $86.73, Koyfin’s surveyed analysts project a 55.5% return over the next 12-months.
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Clearway EnergyGetty Images
Sector: UtilitiesIndustry: Independent power & renewable electricity producersMarket value: $6.4 billionConsensus analyst rating: Strong Buy (8 analysts)Clearway Energy (CWEN, $32.87) engages solely in the renewable energy industry in the U.S. As of March 2, 2021, the company had approximately 4,200 net megawatts (MWs) of installed wind and solar generation projects. CWEN also has an additional 2,500 net megawatts of natural gas generation facilities, as well as a portfolio of district energy systems.
Currently, 10.2 million Class C shares of CWEN are held by 72 different ETFs, the largest of which is IWM with 1.85 million shares. The top three funds holding the stock by weighting are all clean energy ETFs: ALPS Clean Energy ETF (ACES) at a 3.4% weighting, Virtus Duff & Phelps Clean Energy ETF (VCLN) at a 2.7% weighting, and Fidelity Clean Energy ETF (FRNW) at 2.2%.
“We continue to see CWEN as well-positioned to benefit from the ongoing U.S. decarbonization trend,” writes UBS analyst William Grippin, who rates the shares at Buy. Grippin calls out the company’s dividend yield, currently at 4.1%, as a reason to be bullish on the shares.
And Oppenheimer analyst Noah Kaye recently upgraded “shares of CWEN to Outperform following material strategic progress supporting long-term portfolio and dividend growth objectives.”
These two are hardly alone in thinking CWEN is one of the best energy stocks around. Of the eight analysts surveyed by Koyfin, seven rate the stock a Buy and one says it’s a Hold. This translates into an overall Strong Buy rating at Koyfin. Plus, the analysts surveyed project a 12-month price target of $40.50. That’s a 23.2% increase in share price.
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XPengXPeng
Sector: Consumer discretionaryIndustry: AutomobilesMarket value: $34.3 billionConsensus analyst rating: Strong Buy (16 analysts)With regard to Chinese electric vehicle maker XPeng (XPEV, $39.15), investors need to keep in mind what DoubleLine Funds founder Jeffrey Gundlach told Yahoo Finance on Jan. 5: “China is uninvestable.”
Gundlach no longer trusts the U.S.-China relationship. He fears “investments in China could be confiscated.” This shouldn’t come as a surprise. China has seen significant crackdowns on its companies in recent years, the latest being Didi Global’s (DI) plan to delist later this year after a tumultuous initial public offering (IPO) sparked in part by increased regulatory pressures from Chinese authorities.
However, for investors willing to take the risk, XPeng could offer tremendous potential as far as green energy stocks go.
Of the 16 analysts surveyed by Koyfin, six rate the company a Strong Buy, eight say it’s a Buy and only two rate it a Hold. That’s enough for Koyfin to give the Chinese automaker an overall Strong Buy rating. Not to mention, Koyfin’s analysts surveyed see a potential 12-month average return of 38.7% on XPEV stock.
At the company’s Nov. 23 earnings call He Xiaopeng, co-founder of XPEV, said that “in the third quarter of 2021, XPeng achieved another record with deliveries reaching 25,666 units, representing a year-on-year increase of 199%.”
When you couple this with how the electric vehicle market has a projected CAGR of 24.5% between now and 2030, we’re looking at the EV market growing from a $208.9 billion market in 2021 to a $957.4 billion market by 2030. And there has to be somewhere for investors to put their money other than Elon Musk’s Tesla (TSLA).