While presidential candidate Joe Biden’s plans for clean energy don’t reach the spending levels of the Green New Deal first proposed less than two years ago by some newly elected Democratic members of the U.S. House of Representatives, spending totals remain impressive. The Biden plan calls for $2 trillion in spending on infrastructure over what he hopes is a first four-year term. Representative Alexandria Ocasio-Cortez, one of the authors of the Green New Deal, once estimated spending of $10 trillion.
Cleaner air and water benefit all Americans, but U.S. companies that provide the tools to do the job stand to see demand for their products rise. Right now, many of these companies are fully valued based on 12-month price targets and multiples based on expected earnings in 2021. So while most of these firms don’t pay dividends, growth is what they have to offer.
Here are six companies that have solid positions in the clean energy sector. All are based in the United States and compete against other international companies for clean energy products both domestically and internationally.
One of America’s oldest energy companies, General Electric Co. (NYSE: GE) makes both natural gas-fired and renewable-powered generators. The company’s Power segment has struggled in recent years due in large part to issues with the company’s natural gas-powered turbines. Neither the Power nor the Renewable Energy segment posted a profit in the second quarter, and revenue and new orders declined in both segments as well. The company makes wind turbines that are among the best in the world. GE simply needs to figure out how to market and sell them.
GE’s stock closed at $6.47 on Monday, in a 52-week range of $5.48 to 13.26. The price target on the stock is $7.75, implying an upside of about nearly 20% on a stock that traded more than 50% below its 52-week high. GE pays a dividend yield of 0.61% and shares traded Monday at around 18.5 times expected 2021 earnings.
In 2019, First Solar Inc. (NASDAQ: FSLR) posted a 36% year-over-year revenue increase and an operating income gain of 600% to $279.5 million for the year. Net income, however, plunged from $144.3 million to a net loss of $114.9 million. The company recently has been able to find buyers for its big solar projects, and that has helped its cash flow significantly. Since 2012, the stock has not closed above $79.
Shares closed at $73.61 most recently, in a 52-week range of $28.47 to $78.54. The price target of $64.10 implies that the stock is overvalued. Still shares trade about 6% below the 52-week high, and the multiple based on expected 2021 earnings of 21 times is not way out of line.
SunPower Corp. (NASDAQ: SPWR) has a market cap roughly one-quarter the size of First Solar, but that was by choice and not mismanagement. Where First Solar both builds solar modules and large solar farms, SunPower has chosen instead to develop its marketing and packaging of modules and inverters built by other companies. A partnership with sustainable energy financial services firm Hannon Armstrong called SunStrong Capital created a custom-built finance vehicle for SunPower’s products.
The company’s stock closed Monday at $11.48 and has a 52-week range of $4.03 to $15.57. Even though shares trade at around 26% below the 52-week high, they also trade 25% above any upside suggested by the share price. The company pays no dividend, and at the closing price does not project a meaningful multiple to 2021 expected earnings.
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