The transition of the global energy market from fossil fuels to renewables will certainly create some excellent long-term investing opportunities, but one Wall Street analyst said Monday that clean energy stocks are facing elevated risks in the near-term.
The Analyst: Morgan Stanley analyst Andrew Percoco made the following changes to his clean energy coverage:
- Initiated coverage of Sunnova Energy International Inc NOVA with an Overweight rating and $35 price target.
- Initiated coverage of Enphase Energy Inc ENPH with an Equal Weight rating and $268 price target.
- Downgraded Plug Power Inc PLUG from Overweight to Equal Weight, cut the price target from $35 to $15 price.
- Downgraded First Solar Inc FSLR from Equal Weight to Underweight, raised the price target from $194 to $200
Related Link: X Gonna Give It To EVs: How U.S. Steel Is Catering To Growing Auto Industry
The Thesis: In his new note, Percoco described four key themes he's watching in clean energy technology:
- Uncertain financing environment.
- Long-term federal support from the Inflation Reduction Act.
- Battery storage manufacturing oversupply could bring down costs and accelerate growth.
- Distributed energy is a threat to the traditional power grid.
"We are now taking the midpoint of our base case and bear case for clean tech stocks with direct exposure and reliance on financing to fund future growth, to reflect near-term uncertainties related to access and cost of financing," Percoco said.
Related Link: Billionaire Chamath Palihapitiya Predicts New Law Showering Billions On Clean Energy To Create World's First Trillionaire
In addition to the rating adjustments, he named Bloom Energy Corp BE his top stock pick in the clean energy technology space and said the company has several potential bullish catalysts ahead, including quarterly results, hydrogen hub announcements and large electrolyzer orders.
Benzinga's Take: There will be plenty of money to be made in green energy over the next several decades. Unfortunately, the industry is still in its infancy and faces a number of challenges, making it a high-risk play at this point.
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