Whether you’re for or against the concept, green energy uptake is growing exponentially. Although a transition to renewables faces significant challenges, it is worth considering that the program is in early-stage adoption, meaning hurdles are entirely normal.
Let’s examine a few data points to add substance to my claim.
Renewable energy is blessed with end-market expansion. For example, electric vehicles comprised 18% of global new vehicle sales this year. Furthermore, green energy sourcing surpassed coal in 2022 in the United States and expanded in 2023 to settle at 13.1% of the region’s energy mix.
I’m not going to delve into the scientific side of it all. However, I will say that innovation usually follows consumer demand. The demand for gteen energy is robust, and governments are on board with significant subsidies committed to the arena. As such, adding a few green energy stocks to your portfolio would be wise.
Here are three renewable energy stocks that look set to beat the market for years to come.
Sunrun (RUN)
Sunrun’s (NASDAQ:RUN) near 40% year-to-date slump has discouraged many investors. However, SUN stock’s decay has opened up a value gap communicated by the fact that its price-to-sales ratio of 1.27x is at a five-year discount of approximately 67%.
Even though Sunrun missed its third-quarter revenue target by $11.9 million, it delivered an earnings-per-share beat of 56 cents. Suncrun’s subscriber base grew by 19% year-over-year, but a challenging pricing environment inevitably led to below-target revenue. A better sales environment will likely occur in 2024 amid a lower inflation rate and a potential interest rate pivot, which combined may stimulate consumer confidence. Furthermore, Sunrun’s storage capacity is set to increase by 220 to 245 megawatts in its fourth quarter, forming a base for further expansion next year and allowing for enhanced revenue capacity.
SUN stock’s beta coefficient of 2.49 times means it is a risky bet. Nevertheless, its prospects seem bright, given a fundamental inflection point and robust company fundamentals.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) is another buy-the-dip opportunity with a few event-driven variables supporting it. CSIQ stock has shed nearly a third of its market value since the turn of the year, and the stock wasn’t done any justice when the firm lowered its fourth-quarter sales guidance last month.
As with Sunrun, Canadian Solar’s primary influencers in 2024 will be systematic variables. However, a few company-specific catalysts have occurred. Firstly, Canadian Solar recently won a noteworthy 500-megawatt supply contract linked to the largest battery-storage project in the United Kingdom. The contract settled shortly after Canadian Solar got selected for a 240-megawatt battery storage project in Australia. I believe these contracts lend analysts the necessary latitude to improve our Canadian Solar revenue outlook for 2024.
Canadian Solar’s profit margins receded in 2023 amid higher input costs and a challenging pricing environment. However, material costs have eased, and as mentioned earlier, consumer sentiment could pick up with a 2024 interest rate pivot. Therefore, I would not be surprised to see CSIQ stock surge, especially as its price-to-earnings ratio of 4.42 times is at a five-year discount of approximately 70%.
Enphase Energy (ENPH)
Goldman Sachs (NYSE:GS) recently released an equity research report that labeled Enphase Energy (NASDAQ:ENPH) “a buy-rated laggard.” Goldman’s base case is that laggards with robust fundamentals often revert to mean and outperform the market.
I looked at ENPH stock from a different vantage point and concurred with Goldman’s buy rating. Enphase’s broad-based market share currently stands at a staggering 12.78%. The company has successfully leveraged its participation in micro-inverters, battery energy storage, and EV charging stations, which shows in its five-year compound annual growth (CAGR) of 54.97%.
Significant momentum opportunities are in store, with the micro-inverter space set to grow at a CAGR of 20.8% until 2025, EV charging at 36% until 2030, and battery storage by 14.6% until 2032. Moreover, Enphase has a five-year average earnings before interest and tax profit margin of 17.09%. Thus suggesting it is en route to economies of scale, which would grant it superior pricing power.
Enphase’s price-to-earnings-growth ratio of 0.29 times suggests its stock is grossly undervalued. Although its third-quarter results disappointed with a revenue miss of $15.72 million, more robust consumer demand will likely occur next year, promoting the stock nearer to its fair value.
On the date of publication, Steve Booyens 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.