Let’s talk about energy. It makes our world go ‘round, coming from sources as varied as fossil fuels, nuclear power plants, hydroelectric stations, and the sun and wind. Politically, it’s become something of a hot potato, with a tug-of-war going on between the proponents of traditional hydrocarbon energy sources squaring off against the boosters of renewable energy.
Long term, however, renewable sources – with their promise of, eventually, lower costs and lower rates of pollution – are likely to expand their footprint.
Against this backdrop, we’ve used the TipRanks database to find two renewable energy stocks that show plenty of growth potential, on the order of 70% or better, according to the analyst community. Here are the details.
Sunnova Energy (NOVA)
We’ll start with Sunnova, a company involved in residential energy production. This is a truly consumer-oriented niche within an industry that usually tends toward the large; Sunnova develops and markets solar energy systems designed for home installation and use. Customers can choose from a variety of products and services – including roof solar panel installations and energy storage batteries – to create a grid-independent power system in their home. Sunnova operates in 26 states, mainly in the Southwest and Northeast, but also in Florida and the Carolinas. The company boasts over 116,000 customers and more than 500 dealers and sub-dealers of its products.
The company added 8,900 of those customers in Q1 of this year, a quarter that saw the company record $41 million in top-line revenue. This was up 41% year-over-year. The EPS still runs at a loss; however, the 31-cent loss recorded in Q1 was the narrowest in three quarters, and a strong improvement from the 84-cent loss reported in the year-ago quarter.
Sunnova finished Q1 with $263.5 million in cash on hand. In May, the company moved to enhance its available capital through a sale of convertible senior notes. The offering, of notes worth a total of $500 million, will mature in December 2026.
Covering Sunnova for Guggenheim, 5-star analyst Joseph Osha sees a clear path ahead for the company's continued growth.
“NOVA has managed to achieve remarkably rapid growth, with our forecasted 2021 installation volume almost double 2020 and 3x 2019. We show high growth headed into 2022 as well, at almost 40% YoY. We believe that one factor behind NOVA’s success is the company’s dealer-based model, wherein the company does not generate its own subscribers but rather works with its network of dealers. There are some compromises, notably what dealers have to be paid, but the payoff has been rapid growth,” Osha opined.
To this end, Osha rates NOVA a Buy, with a $51 price target that suggests a one-year upside of 70%. (To watch Osha’s track record, click here)
The 9 recent analyst reviews on NOVA are all positive, making the Strong Buy consensus rating unanimous. The stock is priced at $30.17, and its $52.63 average price target implies an upside of ~74% for the coming year. (See NOVA stock analysis at TipRanks)
Fusion Fuel Green (HTOO)
Next up, Fusion Fuel Green, works in the hydrogen economy. Hydrogen, one of the universe’s most plentiful elements, is also highly reactive chemically – and those reactions typically release a great deal of energy. When hydrogen’s reactivity is channeled safely, it shows promise as a source of clean, renewable, and cheap energy for a variety of power systems.
Fusion Fuel is working in new technologies in the production of zero-emission ‘green’ hydrogen, to produce clean fuel at competitive prices. The company uses electrolyzer technology, which will be integral to hydrogen production plants.
So far, Fusion Fuel has yet to commercialize its products or technology. The company is in development stages, and remains highly speculative – but it is building a position in a hydrogen fuel market that is starting to expand.
Fusion Fuel entered the public trading markets this past December, through a SPAC (special acquisition company) merger agreement with HL Acquisitions Corporation. HTOO shares began trading on the NASDAQ on December 10 of last year when the SPAC transaction was completed. The merger brought $70 million in new capital to Fusion Fuel.
Last month, Fusion Fuel released its first earnings results as a public company. Since the company is not yet in commercial operation, revenues were a nominal 500,000 Euro, derived mainly from sales of custom components related to the hydrogen production tech. Fusion Fuel reported having cash on hand of 62 million Euro as of the end of Q1, up 6.8% from the total reported at the end of 4Q20.
Turning to the analyst community, H.C. Wainwright analyst Amit Dayal believes the company has a lot going for it and a bright future.
“Significant commercialization opportunity should drive stock performance. We believe investors who are bullish on decarbonization and green hydrogen adoption should provide some consideration to Fusion Fuel. We believe the potential multi-decade adoption ramp ahead for green hydrogen could make the company's current valuation appear relatively attractive,” the 5-star analyst explained.
Getting into some details of hydrogen’s potential market, Dayal added: “Various industry estimates project that demand for hydrogen, supported by dropping costs and favorable regulations, could increase by 4-7x over the next 3-4 decades…. We believe replacing the existing brown and grey hydrogen infrastructure alone is $100B-plus addressable opportunity, with future applications in transportation and storage adding to this addressable market.”
Based on the above, Dayal rates HTOO shares a Buy, and his $25 price target indicates confidence in a 79% upside for the year ahead. (To watch Dayal’s track record, click here)
Some stocks fly under the radar, and HTOO is one of those. This company, being both pre-commercialization and new to the public markets, has only Dayal’s review on file so far. (See HTOO stock analysis on TipRanks)
To find good ideas for renewable energy stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.