I’ve long been upbeat on green energy stocks in general and renewable stocks in particular. With the world’s largest governments tremendously backing the switch to renewable energy and the electric-vehicle revolution greatly increasing the electricity demand, it was obvious to me that the best renewable names would be very high-reward stocks.
Earlier this year, my belief in that thesis increased. That’s because one of the world’s most successful investors, multi-billionaire Steve Cohen, revealed that he had acquired large stakes in two solar energy companies —SunRun (NASDAQ:RUN) and SolarEdge (NASDAQ:SEDG).
And interestingly, according to fintel.io, many large institutional investors have also recently acquired stakes in another solar energy company, First Solar (NASDAQ:FSLR). For example, on May 15, Royal London Asset Management reported that it had acquired nearly 35,000 shares of FSLR in the first quarter. Also on May 15, AllianceBernstein reported that it had bought 40,655 shares of FSLR in Q1. And finally, also on May 15, Morgan Stanley reported that it had bought 186,110 shares of SEDG in Q1.
These purchases have also greatly increased my confidence in renewable energy stocks in general and solar energy names in particular.
Green Energy Stocks: First Solar (FSLR)
First Solar received good news on May 12 as the Treasury Department ruled that many components of solar panels must be manufactured in the U.S. in order to qualify for America’s new 30% tax credit, Piper Sandler explained on May 12, according to The Fly.
First Solar already has two solar panel plants in Ohio and is almost done building another one there while developing a fourth plant in Alabama. Consequently, it is well-positioned to benefit significantly from Treasury’s stringent requirements.
Additionally, FSLR acquired Swedish solar research company Evolar on May 12. According to FSLR, the deal “should speed up [its] development of next-generation solar technology, including highly efficient tandem devices,” Investor’s Business Daily reported.
Maxeon (NASDAQ:MAXN) is a China-based solar panel maker. Investor’s Business Daily gives MAXN stock a relatively high Composite Rating of 80 out of 99 and a maximum Relative Score rating of 99, showing that the stock has performed extremely well over the past year.
After the company reported higher-than-expected first-quarter earnings per share, Bank of America wrote that the earnings “proved that the execution trend that started last quarter is not a one-off,” The bank expects the company’s 2023 results to surpass increased expectations, and it kept a “buy” rating on the shares.
Also upbeat on Maxeon in the wake of its Q1 results was investment bank Raymond James. The bank is bullish on MAXN due to its large exposure to the rapidly growing European solar sector.
Additionally, Raymond James believes that the market is giving the shares barely any credit for the company’s intention to open factories in the U.S. to get a lift from U.S. manufacturing tax credits. Raymond James maintained an “outperform” rating on the shares. That makes it one of the best green energy stocks in my book.
Quanta Services (PWR)
Quanta (NYSE:PWR) provides “infrastructure solutions” to companies. PWR is benefiting financially from its assistance with the development of renewable energy plants and facilities.
For example, PWR is helping to build what it says is “the world’s largest lithium-ion battery installation” near a “wind farm” in Australia. The company is also providing “engineering, procurement, and construction” services for SunZia Wind, “which Elektrek calls “the largest wind project in the Western Hemisphere.” The project is located in New Mexico.
Quanta is also benefiting from the electric-vehicle revolution, as the company recently launched a partnership with truck maker Navistar to provide the infrastructure needed for large companies to adopt EVs. Quanta will provide “site construction and utility work” to the firms.
Although PWR is not one of the traditional renewable energy stocks, I believe that it is benefiting a great deal from the energy transition and that its future is consequently very bright.
SolarEdge, which makes equipment used in solar projects, reported very strong first-quarter results on May 3, as its revenue jumped 44% year-over-year and its operating income climbed to $144.2 million from $50.9 million during the same period a year earlier.
“Our diverse geographic and segmental footprint enables us to continue to grow revenues without being overly dependent on any single market or segment. As we see supply chain challenges gradually improving, we remain focused on execution and efficiencies to drive up margins and profitability.” CEO Zvi Lando said in a statement.
As I noted in the introduction, Morgan Stanley on May 15 reported that it had bought 186,110 shares of SEDG in Q1. Also on May 15, T. Rowe Price reported that it had bought a huge 371,509 shares of SEDG stock in Q1, according to fintel.io.
Given SolarEdge’s rapid growth, its 31.75x forward price-earnings ratio is quite attractive. Thus, it is one of the top green energy stocks to buy.
Darling Ingredients (DAR)
Darling (NYSE:DAR) noted that it had launched its third renewable diesel plant last quarter. As a result, the company’s joint venture with Valero (NYSE:VLO), Diamond Green Diesel, has become “North America’s largest renewable diesel producer at 1.2 billion gallons a year,” Darling reported.
Also noteworthy is that, according to Darling’s statement on its Q1 earnings call, California is considering imposing an obligation for airlines that fly to the state to use low-carbon fuel in the future. If implemented, that should help Darling significantly, since the company is converting one of its renewable diesel facilities to a plat that produces Sustainable Aviation Fuel or SAF. Diamond Green Diesel is expected to start producing SAF in 2025.
“Our focus has been on converting part of our processing capacity to SAF because we think that’s the higher value, higher-margin area,” explained Chief Strategy Officer John Bullock.
Given Darling’s huge opportunity in SAF, its forward price-earnings ratio of 11.5x is very attractive.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) is a solar panel maker that produces most of its panels in China. The company has an annual solar module capacity of 75 gigawatts, making it one of the world’s largest producers of solar panels. It sells most of its panels to utilities, making it less vulnerable than some of its competitors to changes in governments’ policies vis-a-vis incentives for consumers’ rooftop solar systems.
Impressively, in the fourth quarter of last year, the company’s net income “nearly tripled to $77.8 million.”
In February Wells Fargo increased its price target on CSIQ stock to $46 from $33. The firm became more positive on the outlook of CSIQ due to “the recent drop in polysilicon prices, a potential U.S. capacity expansion, and” the high level of certainty of the outlook of its shipments in 2023 and 2024, The Fly reported.
The forward price-earnings of CSIQ stock is also a tiny 6.9x, making it among the most undervalued green energy stocks.
Array Technologies (ARRY)
Array (NASDAQ:ARRY) “manufactures and sells ground-mounting tracking systems used in solar energy projects.”
On May 9, the company reported very good first-quarter results, as its revenue climbed 25% year-over-year to $377 million and its EBITDA, excluding certain items, climbed an impressive $66.2 million year-over-year to $67 million, while it generated $41.9 million of free cash flow.
Going forward, the company expects its financial results to be further boosted by new U.S. tax credits for solar manufacturers.
Investor’s Business Daily gives ARRY a Composite Rating of 98 out of 99 and an RS rating of 97 out of 98, indicating that the stock has been very popular in the last year.
As of the date of publication, Larry Ramer owned shares of MAXN and DAR. He may buy shares of ARRY this week. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.