Anyone investing in renewable energy stocks knows that the past few years have been rough. High interest rates and weaker consumer sentiment have hit the sector hard. Many of these stocks are flashing buy signals now as they have been consolidating for years and building nice levels of support on their charts.
Renewable energy companies will go through periods of prosperity and contraction as with any cyclical sector. The old saying is that the longer the consolidation, the more explosive the move when the stock is ready to break out. Renewable energy stocks are prepared to break out. Here are the three stocks we have our eyes on for June 2024!
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is one of the largest pure-play solar companies in the world with a market cap of over $28 billion. Wall Street has always been all over the map with solar stock projections. The current average price target of FSLR is slightly lower than the current traded price, but the street-high target of $356 implies a near 40% upside.
The solar industry was one of the hardest hit by the spike in global inflation and interest rates. After consolidating for the better part of the last two years, FSLR has rebounded well in 2024 in anticipation of upcoming rate cuts. So far, the stock has gained 55% this year with most of those gains coming since the middle of May.
Despite the recent gains, FSLR still trades at 8x sales and 20x forward earnings. Both of these multiples are cheaper than the stock traded at the start of 2023 when the stock price was considerably lower. First Solar’s gross margins are an impressive 43% compared to the industry average of 28.7%. If solar and renewables continue to rebound this year, FSLR should be at the top of the list.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners (NYSE:BEP) is the renewable energy arm of the massive Brookfield conglomerate of asset managers. The current price of BEP is slightly below the average Wall Street analyst target of $28.90, and about 30% lower than the high-end target of $34 per share.
Owning Brookfield Renewable Partners is like owning a basket of diversified renewable energy assets. As of 2023, BEP owned 10,700 megawatts (MW) of hydro assets, 37,200 MW of wind, 75,300 MW of solar, and 26,400 MW of storage and other sources. Brookfield’s footprint stretches across 30 different power markets in more than 20 countries worldwide.
Shares of BEP trade at just 1.4x sales with a 10-year revenue compounded annual growth rate (CAGR) of 11%. Brookfield is a corporation that is always looking to expand its holdings and aggressively acquire new infrastructure. On top of its stable growth, BEP also pays a dividend yield of more than 5% that pays shareholders quarterly. BEP is your best bet if you want to invest in renewables without the volatility.
Rivian (RIVN)
Most people automatically think of Tesla (NASDAQ:TSLA) when they think of electric vehicles (EV). But other companies like Rivian (NASDAQ:RIVN) are starting to take a share of the global EV market. Analysts have a one-year price target range of $10 to $36 with an average target of $15.92. The high-end target implies the potential for a more than 200% move higher!
Much has been made of Rivian’s stock drop-off from its IPO. The company has battled the challenges of scaling production without running out of cash. For early EV investors, it is reminiscent of the challenges Tesla faced early on as well. Rivian recently announced three new lower-priced vehicles that should hit the market by 2026. Shareholders are hoping that this will have the same impact as when Tesla released the Model 3 and Model Y vehicles.
As for the stock, RIVN is trading at historical lows compared to its revenue. Shares are trading at just 2.2x sales while significantly improving its revenues over the past three years. Tesla took years of consolidating at lower prices before exploding higher when it managed to scale operations into a profitable business. We believe that Rivian is going through the same cycle at this rock-bottom price.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (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.