Unlike majority of the industries that suffered significantly due to the coronavirus crisis, the clean energy industry has showed noticeable growth in 2020. Impressively, the S&P Global Clean Energy Index has surged a solid 135.4% year to date.
Factors like rapidly plummeting costs of solar panels and wind turbines, technological innovations making clean energy products like modules and turbines even more energy efficient, increased corporate investments in renewable as well as rapid transition of the Utility sector toward a zero-carbon environment have contributed to the growth of the industry.
Will the Momentum Continue?
While the clean energy industry seemed to be quite resilient to the COVID-19 crisis, some policy related uncertainties in the near future might threaten this industry’s growth trajectory in 2021. For instance, in China, onshore wind and solar PV subsidies expire this year, while offshore wind support ends in 2021. This might lead to reduced capacity additions in 2021. Afterall the nation plays a major part in the clean energy industry, especially the solar market.
Nevertheless, president-elect Joe Biden’s ambitious investment target of $2 trillion in clean energy infrastructure over the next four years brightens the overall near-term outlook for the clean energy industry.
Moreover, as stated in a Forbes report in June, Goldman Sachs announced its expectation that spending for renewable power projects will become the largest area of energy spending in 2021, surpassing upstream oil and gas for the first time in history.
Such optimism must have served the basis for the U.S. Energy Information Administration to project that the U.S. electric power sector will add 9.5 gigawatts (GW) of new capacity in 2021, while utility-scale solar capacity will rise by 14.0 GW in 2021.
Proceed With Caution
The aforementioned discussion must have been an encouraging one for clean energy investors keen to expand their portfolio. However, before you race to buy some top-performing stocks from this industry like
First Solar ( FSLR Quick Quote FSLR - Free Report) , Azure Power ( AZRE Quick Quote AZRE - Free Report) and Ameresco ( AMRC Quick Quote AMRC - Free Report) , we should warn that not all clean energy stocks are worthy of investment.
Here we discuss three such stocks. Though these have a market capitalization of $1 billion or more and have managed to register a solid share price hike of more than 50% so far this year, they are unlikely to retain the momentum in 2021. The fact that these stocks are Sell-rated (Zacks Rank #4 or 5) dampens their appeal. These are:
SolarEdge Technologies ( SEDG Quick Quote SEDG - Free Report) : This $16.60 billion worth company has gained 234.8% year to date. The Zacks Consensus Estimate for 2021 earnings has moved down 13.5% to $4.56 in the past 60 days. This Zacks Rank #4 (Sell) stock reached its 52-week high of $335.80 on Dec 22. So, an upside in the near term seems unlikely.
The pandemic and the associated travel restrictions impacted the company’s certification and production target dates. This has delayed the release of its residential battery by several months.
Canadian Solar ( CSIQ Quick Quote CSIQ - Free Report) : This $3.13 billion worth company has gained 131.9% year to date. The Zacks Consensus Estimate for 2021 earnings has moved down 41.9% to $2.25 in the past 60 days. This Zacks Rank #5 (Strong Sell) stock reached its 52-week high of $56.42 on Dec 23 and therefore chances of an upside any time soon are slim.
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The company has been facing increased price of raw materials lately, which is likely to continue at least in the first few months of 2021. This in turn can keep its margins and bottom line under pressure.
Clearway Energy ( CWEN Quick Quote CWEN - Free Report) : This $6.59 billion worth company has gained 62.4% year to date. The Zacks Consensus Estimate for 2021 earnings has moved down 1.1% to 93 cents in the past 30 days and implies year-over-year decline of 15.5%. This stock carries a Zacks Rank #4.
The company expects to witness impact of approximately $5 million in 2021 due to COVID-19 related matters. This includes lower volumes at the Thermal segment and the impact from California State taxes resulting from Assembly Bill 85 that was enacted at the end of June. It suspended the company's ability to utilize state net operating losses for the next three years.
Zacks Top 10 Stocks for 2021
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