If you’re looking for undervalued renewable energy stocks to buy, the iShares Global Clean Energy ETF (NASDAQ:ICLN) is an excellent source of investment ideas. It is the largest renewable energy ETF with $5.3 billion in net assets. The ETF tracks the performance of the S&P Global Clean Energy Index, a collection of companies that produce energy from solar, wind and other renewable sources. The ETF currently has 97 holdings, with the top 1o accounting for nearly 46% of its net assets. 

Renewable energy stocks have been in a downturn since early 2021. However, ICLN outperformed the broader market in 2022, losing 5.5% compared with an 18.2% loss for SPDR S&P 500 ETF (NYSEARCA:SPY). ICLN is off to a strong start in 2023, rising nearly 5%.

Raymond James believes clean energy stocks are ready for significant gains in 2023, to the tune of  30% to 40%.

Here are three undervalued renewable energy stocks to buy to ride this wave.

First Solar (FSLR)

First Solar (NASDAQ:FSLR) is the third-largest holding of ICLN with a 6.6% weighting. The solar panel manufacturer’s stock was on a tear in 2023, jumping as much as 24%. But shares sold off today following a downgrade from Bank of America. The bank feels that the benefits of the Inflation Reduction Act of 2022 have already been priced into shares.

If you agree with the BofA analyst, FSLR may not be for you. However, if you’re more inclined toward Raymond James’ point of view and see continued upside in renewable energy stocks, the recent pullback could present an excellent opportunity to buy the dip in a stock that is up more than 130% over the past year.

First Solar continues to invest in its U.S. manufacturing facilities to meet the tremendous demand for its solar panels. In November, the company announced it would spend approximately $1.1 billion to build a fourth plant in Alabama to go along with the three existing facilities in Ohio. The plant will have a capacity of 3.5 gigawatts of direct current. 

First Solar’s planned production for 2025 is already entirely spoken for and it’s close to selling out for 2026, reports Utility Dive. To meet customer demand, the company said it will spend an additional $1.3 billion to increase capacity at its Ohio factories. With this additional investment, First Solar will have put $4 billion into its U.S. manufacturing capacity goal of 10.6 GW by 2025, according to the company’s chief commercial officer, Georges Antoun. 

Shareholders have the Inflation Reduction Act to thank for some of the increased demand. However, Antoun said First Solar was already nearly sold out for 2024 when President Joe Biden signed the legislation into law in August. 

Plug Power (PLUG)

Plug Power (NASDAQ:PLUG) is the seventh-largest holding in ICLN with a weighting of 3.4%. I can’t remember the last time I wrote about the provider of hydrogen fuel cell systems and green hydrogen. I know I was very high on the stock. 

In December 2020, with shares trading around $28.50, I suggested that investors who hadn’t already bought the stock wait for it “to fall into the low $20s or high teens before buying.” It did fall into the high teens, but not until January 2022, 13 months later. In the 13 months since, it had a couple of quick runs to $30 before falling back to Earth.

If UBS analyst Manav Gupta is any indication, PLUG may have bottomed at the end of December. The analyst recently had some good things to say about the company. Gupta rates it a “buy” with a $26 price target, 45% above the current share price.

Per Barron’s: “‘Hydrogen could be a $10 trillion market by 2030, and PLUG aims to be a one-stop shop and market leader in the entire space,’ Gupta wrote in a research note. ‘Investors are under appreciating the growth potential as we forecast $5 billion in sales by 2026 (from current $900 million) vs Street at $3.4 billion.’”

He’s not the only analyst that likes Plug Power. Of the 30 analysts covering PLUG stock, 21 rate it a “buy,” with nine “holds” and no “sells.” 

PLUG is one of the best undervalued renewable energy stocks to buy, but only for aggressive investors.

EDP – Energias de Portugal (EDPFY)

EDP – Energias de Portugal (OTCMKTS:EDPFY) dates back to 1976 when 14 nationalized electricity companies in Portugal were merged into one. It was then privatized in stages between 1997 and 2011.  

In 2008, the company sold 25% of its renewables business, EDP Renewables (OTCMKTS:EDRVY), to investors raising $2.4 billion in the IPO. EDP – Energias de Portugal continues to own just under 75% of its stock. Both are traded over the counter in the U.S. However, I’ve gone with the parent because its daily volume is much greater. 

EDP Renewables is the fourth-largest renewable energy producer in the world, operating or developing capacity in 28 international markets, including the U.S. and the United Kingdom. 

In 2021, EDP Renewables announced it had signed 51 solar projects with Walmart (NYSE:WMT) to generate 38.3 megawatts of distributed energy across seven states. The projects offset 27.1 metric tons of carbon dioxide annually.

At the end of the third quarter, EDP Renewables’ installed capacity stood at 14.3 GW. The company’s goal is to reach 50 GW of renewable capacity and carbon neutrality by 2030.

“EDPR is well and truly on target with its ambitious growth plan owing to its record 4 GW renewable energy capacity under construction in 15 markets around the world, likewise, providing the company with broader technological diversification,” said the press release accompanying the firm’s Q3 results. 

The best part is that both EDP Renewables and EDP – Energias de Portugal are profitable. Moreover, EDPFY’s current enterprise value is 8.4 times EBITDA. This is around its five-year average, so if you buy the stock now, you’re getting fair value for a fantastic group of businesses. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.