Right now, we are on the cusp of a global shift in the green energy economy, as the social and political will has come together to promote a shift from traditional fossil fuels to renewable energy sources. sustainable and environmentally friendly energy. For investors, this change can open new avenues of opportunity.
Morgan Stanley’s Andrew Percoco believes the clean energy opportunity is significant. The analyst maintains a “constructive” view on renewables and has picked two stocks that show upside potential of 100% or better. Percoco isn’t alone in taking a bullish stance on these stocks – by analyst consensus, both are also rated as strong buys.
For risk-tolerant investors looking to double their money, these stocks may warrant further consideration.
Sunnova Energy International (NOVA)
The first stock we will look at is Sunnova Energy. This company is fully invested in the US market for residential solar installations, and its operations – in all segments of the business – have made Sunnova one of the leaders in this field. Sunnova’s operations include all aspects of the solar installation process, starting with rooftop panel installations through home power system connections to energy storage batteries. The company also provides comprehensive backup services for its products, offering repairs, modifications and spare parts as needed. Sunnova even provides financing assistance and insurance to its customers.
Sunnova’s footprint encompasses 40 US states and the company has more than 279,400 active customers on its books. The company serves its customers through an extensive network of dealers, sub-dealers and builders, currently totaling more than 1,100 suppliers. In the last quarter of 2022, Sunnova added 33,000 new customers, capping an annual gain of 87,000. Sunnova expects to continue adding customers in 2023 and has forecast between 115,000 and 125,000 additions for this year.
Looking at 4Q22 and full year financial results, Sunnova posted strong year-over-year quarterly growth. Revenue rose from $65 million to $195.6 million, a 200% gain – and even that may underestimate revenue strength as revenue exceeded expectations by more than $55 million of dollars. Quarterly EPS posted a net loss of 18 cents, but that net loss was 26 cents higher than the expected EPS loss of 44 cents.
Morgan Stanley analyst Andrew Percoco likes the risk/reward ratio that Sunnova shares currently offer, despite acknowledging their volatility potential
“We like NOVA’s exposure to a largely underpenetrated market (4% of US homes), with strong long-term growth prospects. Several near-term risks are present, including a potential prolonged slowdown in demand due to policy changes in California and its exposure to a potentially volatile funding environment, which could put pressure on the stock. That being said, we view this as an attractive buying opportunity for those willing to accept short-term volatility as the stock is trading below the value of its existing assets,” Percoco said.
To that end, Percoco assigns NOVA shares an overweight (i.e. buy) rating and a price target of $35 to imply a potential upside of 126% for the coming year.
Morgan Stanley’s view isn’t the only positive take on Sunnova. The company has 12 recent opinions from high street analysts, with 10 to buy and 2 to hold, for a strong buy consensus rating. Overall, the current trading price of $15.48 and the average price target of $33.08 point to around 114% upside for the stock over the next 12 months. (See Sunnova Stock Forecast)
Stem, Inc. (STEM)
The second Morgan Stanley pick we’ll turn to is Stem, an interesting clean energy game that combines renewable energy and energy storage with artificial intelligence. Stem offers a product line of smart battery systems and an AI-powered platform to optimize connections between onsite power generation, grid power and stored energy. Enterprise customers can take advantage of the system and potentially save between 10% and 30% on their electricity bills.
Stem’s Athena platform is touted as the most widely used system in its class. The AI has been “trained” over tens of millions of runtime hours, making it the most efficient software of its kind. Stem’s platform is available globally, and the company’s footprint spans 75 jurisdictions globally, and Athena is used with over 200,000 solar sites, managing over 25 gigawatts of assets solar. Stem estimates that its addressable market can reach $1.2 trillion by 2050.
Stem is already showing strong growth, and in 2022 the company reported total revenue of $363 million, up 186% year-over-year and a record for the company. On a quarterly basis, the company’s revenue of $156 million increased 194% year-on-year. However, market analysts had forecast $166 million in revenue for the quarter, and the full-year 2023 forecast, set at $550-650 million, was lower than the consensus forecast of $647 million at mid-term. journey.
Shares of Stem are down 51% in the past 12 months, but that hasn’t deterred Morgan Stanley’s Percoco, who writes: “We continue to view STEM’s software-focused strategy as a favorable way to play the energy storage market and as a long-term growth driver that is vastly undervalued at the current 20% stock discount to its energy storage counterparts… We view STEM as a key beneficiary of improved battery supply chain and see an attractive cross-sell opportunity between its legacy storage business and its solar monitoring business…”
These comments confirm Percoco’s overweight (i.e. buy) rating on Stem shares, and its $12 price target implies solid upside potential of 103% year over year.
Overall, clean energy has become a go-to sector for investment and recent 8 analysis from STEM analysts, favoring buys over takes 7 to 1, reflects this. Strong Buy stock has an average price target of $13.63, suggesting a potential gain of 130% from the current trading price of $5.91. (See STEM Stock Forecast)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.