Investors find themselves at a crossroads, deliberating between energy stocks that warrant investment and those that should be jettisoned. It’s an arduous task, given the current atmosphere in the sustainability sector. However, according to analyst Jordan Levy of Truist Securities, there seems to be “meaningful upside opportunity” as the Federal Reserve swings into an interest rate cutting cycle – particularly for the residential solar group. In contrast, Levy sees “incremental downside risk” looming over more nascent industries such as hydrogen and fuel cells.
It’s worth noting that Levy has previously had notable calls in the market. Consider checking out other analyst stock ratings to form a balanced viewpoint.
Analyst Rating Changes
- Levy upgraded the rating for Sunnova Energy International Inc NOVA from Hold to Buy, simultaneously elevating the price target from $10 to $18.
- The analyst also upgraded the rating for Enphase Energy Inc ENPH from Hold to Buy, while adjusting the price target from $85 to $145.
- Conversely, Levy downgraded the rating for Bloom Energy Corp BE from Hold to Sell and slashed the price target from $12 to $9.
Insight into the Sustainability Thesis: As the 2024 Presidential election approaches, there is heightened headline risk for the entire group of sustainable energy companies. “We see more deeply engrained sectors such as utility-scale solar & biofuels carrying significantly less risk of policy reform vs. more nascent industries like Green Hydrogen,” wrote Levy.
The current scenario presents an interesting dichotomy. While valuations have plummeted to multiyear lows, it seems to be the case “not only for subgroups that have seen significant downward revisions in growth expectations like resi solar (~41% avg. discount to 5-yr avg), but in areas where growth has held up more favorably i.e. utility-scale solar,” according to Levy.
Levy asserts that while some stocks are trading at a discount due to financial turmoil, the broad valuation discount creates opportunities for upside in select names, particularly Sunnova Energy International and Enphase Energy.
Price Action for NOVA ENPH BE: At the time of publication on Tuesday, shares of Sunnova Energy International had climbed by 7.18% to $11.20, Enphase Energy had surged by 4.47% to $111.94, and Bloom Energy had registered a modest 0.95% gain, reaching $12.19.
For those seeking more market insights, consider the varied prospects illustrated by 3M’s recent earnings beat and why analysts are maintaining a neutral sentiment.
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