Growing concerns about climate change are pushing governments around the globe to focus more on transitioning to a sustainable future powered by renewable energy. On the domestic front, renewable energy stocks are expected to gain traction under a Biden-led White House. The president-elect has plans to invest $2 trillion over a period of 4 years to significantly increase the use of clean energy in various sectors.
In addition to a decline in the cost of storing and using renewable energy, the International Energy Agency (IEA) has confirmed that solar energy is now the ‘cheapest electricity in history.’ Investors’ growing enthusiasm for the renewable energy space is evident. iShares S&P Global Clean Energy Index Fund (ICLN) has returned 81.9% over the past six months.
So, it may be wise to invest in the shares of established companies like Enphase Energy, Inc. (ENPH), Brookfield Renewable Partners L.P. (BEP), and Bloom Energy Corporation (BE) that have appreciated this year. We think these companies have the ingredients to generate market-beating returns next year.
Enphase Energy, Inc. (ENPH)
Founded in 2006, ENPH is the world’s leading supplier of microinverter-based solar-plus-storage systems. Its microinverter system consists of four components — Enphase microinverters, the AC Battery, an Envoy gateway and Enlighten cloud-based software. The company has registered more than300 patents and operates in more than 21 countries.
ENPH’s revenue climbed 42.2% sequentially to $178.5 million for the third quarter ended September 30th. The quarter’s strong were driven primarily by the rise in demand for its microinverter products. ENPH shipped roughly 478 megawatts DC, or 1,442,743 microinverters. Its non-GAAP gross profit margin increased to 41%, driven by disciplined pricing and cost management. While non-GAAP net income increased 5.8% year-over-year to $41.8 million, non-GAAP EPS increased 76.5% sequentially to $0.30.
Analysts expect ENPH’s revenue to increase 21.5% for the quarter ending December 31st, 2020, 22.8% this year, and 61.8% next year. The company’s EPS is expected to increase 34.7% this year, 44.5% next year, and at a rate of 36.6% per annum over the next five years. ENPH’s earnings surprise history looks impressive, with the company surpassing consensus EPS estimates in each of the trailing four quarters.
ENPH entered into an agreement with MSpectrum on November 16tht that will distribute the company’s IQ 7 family of microinverters to residential and commercial installers across the Philippines in the first quarter of 2021. On November 12th, the company entered a strategic partnership with DMEGC Solar Energy to develop high-efficiency Enphase Energized AC modules (ACM) for the European residential solar market. The stock has gained more than 402% year-to-date and is currently trading 11.9% below its 52-week high.
How does ENPH stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Overall POWR Rating
The stock is also ranked #1 out of 19 stocks in the Solar industry.
Brookfield Renewable Partners L.P. (BEP)
Based in Hamilton, Bermuda, BEP operates one of the world’s largest publicly traded renewable power platforms. The company generates electricity through hydroelectric, wind, solar, cogeneration, and biomass sources. It has more than13,000 MW of renewable power generation in its development pipeline diversified across 27 markets.
For the third quarter ended September 30th, BEP’s generation increased 8.3% year-over-year to 12,007 GWh. Funds from Operations (FFO) increased 18% year-over-year to $157 million. While revenues from Solar increased 114.3% year-over-year to $120 million, revenues from Wind increased 17.4% year-over-year to $101 million. Actual generation of wind power in North America increased 43.7% year-over-year to 832 GWh.
The consensus revenue estimate of $3.24 billion for the quarter ending December 31st, 2020 indicates an 8.6% increase from the same period last year. The consensus EPS estimate for the quarter ending December 2020 represents a 346.1% increase year-over-year. BEP’s EPS is expected to grow at a rate of 53.3% per annum in the next five years.
On October 27th, JP Morgan Chase & Co. (JPM) and BEP announced a five-year energy agreement in October to supply clean, renewable electricity to more than 500 of JPMorgan Chase’s real estate operations in New York State. And on September 24th, Plug Power, Inc. (PLUG) announced an agreement to source 100% renewable energy supplies from BEP to fully energize PLUG’s planned green hydrogen production plant. On a year-to-date basis, BEP has rallied 55.5% to close yesterday’s session at $57.99. Over the past six months, BEP has soared more than 48%.
BEP’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade, and Peer Grade. Among the 18 stocks in the MLPs – Other industry, it is ranked #3.
Bloom Energy Corporation (BE)
Based in Sunnyvale, California, BE designs, manufactures, and sells solid-oxide fuel cell (SOFC) systems. The company offers Bloom Energy Server, which is a stationary power generation platform that converts standard low-pressure natural gas, or biogas, into electricity through an electrochemical process without combustion. The Company offers its services to several industries, such as banking, cloud services, data centers, consumer packaged goods and consumables, government, and healthcare, to name a few.
BE’s revenue climbed 6.6% sequentially to $200.3 million for the third quarter ended September 30th, due primarily to a one-time $14.2 million of deferred revenue recognition. On a non-GAAP basis, its gross profit increased 92.2% sequentially to $60 million, yielding a gross margin of 29.7%. The company achieved total acceptances of 314 systems, which represents a sequential increase of 2.6%.
Analysts expect BE’s revenue to increase 33.2% for the quarter ending March 2021, and 26.8% next year. The company’s EPS is expected to increase 92.9% for the current quarter ending December 30th, 96.9% next year, and at a rate of 25% per annum in the next five years. The stock has gained 244.9% so far this year to close yesterday’s trading session at $25.76.
BE powered the Gillette Stadium in Foxborough, Massachusetts in a deal with the Kraft Group in the last quarter. And on November 18th, BE won a competitive request for proposals (RFP) under the RE100 program to supply SOFCs powered by 100% hydrogen and electrolyzers to an industrial complex in Changwon, Korea.
It is no surprise then that BE is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, and a “B” for Industry Rank. In the 59-stock Industrial – Equipment industry, it is ranked #28.
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ENPH shares were trading at $140.13 per share on Friday morning, up $8.92 (+6.80%). Year-to-date, ENPH has gained 436.28%, versus a 14.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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