Finance
These three stocks are poised to benefit from the massive energy transition
The energy transition includes technologies ranging from renewable energy sources such as solar and wind energy to upgrades to the electricity grid to increase energy demand.
While higher interest rates put pressure on the clean energy sector last year, rising demand for electricity for everything from artificial intelligence to electric vehicle charging is expected to boost the clean technologies sector.
Incentives from the government’s Inflation Reduction Act (IRA), aimed at accelerating the transition to green, domestically produced technologies, are also expected to boost the sector.
Below are three stocks that analysts say are well positioned to benefit from the energy transition in the US.
First solar energy (FSLR)
Among renewables, First Solar has 31 buy recommendations, six hold recommendations, and zero sell recommendations. The Tempe, Arizona-based company is the largest supplier and domestic manufacturer of solar panels in the U.S., with sales backlog stretching beyond 2027.
“FSLR is leading the way and has built a robust domestic supply chain and manufacturing footprint, making it a major beneficiary of the IRA. As a domestic manufacturer, FSLR is also able to reduce expensive freight costs and avoid tariffs and import risks,” Christopher Dendrinos of RBC Capital recently noted.
Goldman Sachs analysts are also bullish on the stock, seeing it as a beneficiary of utility-scale projects’ need to provide additional power for data centers and AI workloads.
“Companies are likely to look domestically for their panels to take advantage of the domestic content bonus. In some cases, FSLR even works directly with companies that own the data centers, such as Microsoft (MSFT),” said Goldman Sachs analyst Carly Davenport and her team.
Year to date, First Solar is up 14%.
Vernova (GEV)
The maker of wind turbines and natural gas turbines recently spun off from GE (GE). Analysts were impressed last month with the company’s first quarterly earnings call as an independent company.
“GEV’s product portfolio spans the value chain from power generation to electron transport and network management, and we expect the addressable market to double by 2030 compared to 2022, benefiting from increasing electricity demand and increasing network complexity,” said Dendrinos of RBC Capital . The company has a $160 price target and an Outperform rating on the stock.
Goldman Sachs also has a buy rating on the stock with a price target of $268.
“We expect GEV to benefit from secular growth trends as electricity demand accelerates,” Goldman analysts said.
Year to date, Vernova is up 16%.
NextEra Energy (NO)
The $147 billion market capitalization company provides energy for retail and commercial use from renewables, natural gas and nuclear power.
“The re-domestication of industry in the US, supported by government policy, will increase the need for more electricity,” NextEra CEO John Ketchum said during the company’s last earnings call in April.
Analysts see an increase in electricity consumption due to artificial intelligence and data centers as a key growth driver.
“NextEra’s unregulated renewable business NextEra Energy Resources (NEER) is uniquely positioned to benefit from data center growth,” Goldman Sachs’ Davenport wrote.
The stock has 17 buy ratings, five hold ratings and one sell rating.
NextEra is up about 16% year to date.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
