3 Renewable Energy Stocks to Add to Your Watchlist
Renewable energy technologies convert energy from natural sources such as the sun, tides, wind, and others into usable forms such as electricity. According to Allied Market Research, the global renewable energy market is expected to grow at a CAGR of 6.1% between 2018-2025, reaching $1,512.3 billion by 2025. This growth will be driven by the policies from the national and international bodies to decrease CO2 emissions. The growing attention on alternative fuels to achieve an imperishable form of energy will boost the given industry as well.
Additionally, over the past month, the renewable energy industry slightly outperformed the market, as evidenced by the 3.80% increase in the iShares S&P Global Clean Energy Index ETF (ICLN), compared to SPDR S&P 500 Trust ETF (SPY) 3.29% gains over the same period.
Given the bullish outlook for the renewable energy industry, Wall Street analysts expect renewable energy stocks Daqo New Energy Corp. (DQ), Plug Power Inc. (PLUG), and ReneSola Ltd. (SOL) to rally more than 30% in the coming months.
Daqo New Energy Corp.
Daqo New Energy Corp. (DQ) is a leading manufacturer of high-purity polysilicon for solar power solutions across the globe. The company, based in Shanghai, China was founded in 2016 and currently trades around $68 per share.
On May 18, Daqo New Energy Corp. reported earnings for the first quarter of 2021. In Q1, total revenue has risen 51.7% year-over-year to $256.1M. However, DQ failed to beat analysts’ estimates, missing 41.87$ million in revenues. Also, the company reported Non-GAAP EPADS of $1.13, beating Wall Street expectations by $0.24.
Moreover, the company’s polysilicon sales volume was 20,185 metric tons (MT) in Q1 2021, compared to 21,008 MT in Q4 2020. However, polysilicon’s average selling price (ASP) has increased to $5.37/kg in Q1 2021 from $5.04/kg in Q4 2020. The fiscal 2021 polysilicon production guidance of 81.000 – 83.000 MT implies about 20.000 MT in external sales volume per quarter. In our view, it’s a realistic scenario for DQ which will boost its revenue numbers in consecutive quarters.
For the second quarter, the analysts expect DQ’s EPS to stand at $2.54 compared to $0.03 in the year-earlier period, indicating enormous 8366.67% year-over-year growth. Additionally, a $389.15 million average revenue estimate for its second quarter of 2021 indicates a 191.50% improvement year-over-year.
Despite its huge growth numbers, the company currently trades with a moderate Forward P/E multiple of 8.56x and looks undervalued compared to the sector’s median Forward P/E ratio of 26.87x. Besides, DQ’s forward Price/Sales of 3.53x is 12% lower than the industry’s median 4.02x.
According to TipRanks, the company has an average price target of $92.7, representing a solid 36.73% upside opportunity.
Plug Power Inc.
Plug Power Inc. (PLUG) is a leading maker of hydrogen cells for the electric mobility and stationary power markets in North America and Europe.
On June 22, the company delivered mixed Q1 results which concerned some investors, fueling further drop of PLUG shares. The stock has declined 45.35% over the past six months, and 9.37% over the past month.
In Q1, the company’s revenue increased 76.4% year-over-year to $71.96 million, beating analysts’ estimates by $5.34 million. However, the GAAP loss per share stood at $0.12 compared to consensus estimates of ($0.08). Additionally, net loss increased to $60.75 million from $37.45 million a year ago. Let’s take a look at its 10-Q more in-depth.
Major driver of its Q1 revenue beat was a 128% increase in sales of fuel cell systems which totaled to $46.7 million. Product gross margin saw improvement by 6 bps, growing to 38%. Besides, the company recognized 1,308 GenDrive units in Q1 versus 825 GenDrive units in the prior quarter.
Let’s take a look at Friday’s options trades as well. The $25.00 puts, which expire on January 21, 2022, have seen increased open interest levels by about 9,073 to a total of 24,941 (source: barchart.com). However, what’s most interesting is that the puts were traded on a bid side, which suggests that the contracts were sold. Consider that PLUG stock should stay above $28.45 to earn a profit for the options holder. This transaction means bullish outlook from options traders for PLUG stock.
According to TipRanks, PLUG has an average price target of $44.21, representing a great 50.43% upside from Friday’s closing price.
ReneSola Ltd. (SOL) is a technology company that develops, constructs, and sells solar power projects. The company, based in Stamford, Connecticut, was founded in 2005 and went public in January 2008. Currently, SOL has a market cap of ~ $594 million and trades around $8 per share.
In the first quarter of 2021, SOL’s revenue was up around 8% on a year-over-year basis to $28.78 million. Also, the company reported GAAP earnings per share of $0.01, beating Wall Street expectations by $0.03. Currently, Wall Street expects ReneSola’s earnings to grow 83.33% in fiscal 2021 to 0.17 per share. Following this trend, analysts forecast that its FY2021 revenue could rise to $97.49 million. This estimate implies a rise of 31.90% on a year-over-year basis.
Additionally, the company has a healthy balance sheet. As of March 31, 2021, the company had total cash of $300.99 million and total debt of $83.23 million, bringing its total net cash to $217.76M. Cash used to run the company’s operations during the first quarter of 2021 was roughly $10.4 million. According to the company’s earnings call, the cash burn rate is expected to decrease due to gross margin improvement. Based on that, the company won’t face any liquidity problems for the next 24 months.
According to CNN Business, one of the company’s largest institutional shareholders, SSgA Funds Management, Inc., bought 500k shares of SOL during the first quarter of 2021, growing its total stake to 4.54%. The increasing institutional activity could be considered as an obvious bullish sign for the company.
According to TipRanks, SOL has an average price target of $12.07, representing a great 48.65% upside from Friday’s closing price.