Investors, including those who own green energy stocks, have myriad reasons to be bearish currently. Inflation remains high, with the year-over-year CPI registering 8.3% in August. The Fed responded as expected, raising interest rates by 0.75 percentage points, or 75 basis points, on Sept. 21.
That rate increase, the central bank’s third straight 75 basis-point hike, has resulted in the market taking yet another downturn. The S&P 500 dipped to 3,670 on Sept. 22. That is less than 100 points off its 2022 low of 3,667 which was set on June 16.
In short, there are many valid reasons to be wary of stocks. However, forward-looking investors would be wise to recognize the opportunities that exist.
One such opportunity is the projected growth of green energy and renewable energy. Polaris Market Research estimated earlier this year that the revenue of the global renewable energy market would reach $1.68 trillion by 2029. That equates to an average annual growth rate of 8.5%, suggesting that the sector will provide investors with serious opportunities despite the market’s current woes.
| ALB | Albemarle | $265 |
| NEE | NextEra Energy | $81.15 |
| ORA | Ormat Technologies | $90.29 |
| AMRC | Ameresco | $68.22 |
| CWEN | Clearway Energy | $33.67 |
| BEP | Brookfield Renewable Partners | $32.95 |
| ON | ON Semiconductor | $62.70 |
Albemarle (ALB)
Albemarle (NYSE:ALB) stock has emerged as one of the preeminent pick-and-shovel equities in the EV space. The company mines lithium and bromine, both of which are vital to the production of EV batteries.
Albemarle is directing significant resources towards mining those chemicals. On Aug. 30, it announced that it would split its lithium and bromine mining operations into their own business unit in order to more effectively meet the demand for those two chemicals.
Since announcing the move, ALB stock has been flat overall as it jumped from $272 to over $300, only to return to the $270 level. Today it’s changing hands for $266 per share. But its recent downturn was more of a reflection of Fed interest rate decisions and overall fear than an indictment of Albemarle.
ALB raised its revenue guidance in early August to a range between $7.1 billion and $7.5 billion. Previously, the firm had provided guidance for full-year sales of between $5.8 billion and $6.2 billion. Its EBITDA increased 214% year-over-year in Q2, and Albemarle is opening operations in Australia and the U.S.
All of these developments indicate that the company will have greater opportunities moving forward, and they make ALB stock a good investment as its prices dip.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) stock represents a Florida firm that creates electricity from renewable energy and owns utilities. A recent Morgan Stanley upgrade, along with those diverse operations, make NEE an equity worth buying in October.
Let’s begin with Morgan Stanley’s upgrade. Earlier in September, Morgan Stanley analyst David Arcaro increased his price target on NEE stock from $94 to $99. He took that action because he thinks that the Democrats’ health-and-climate bill, also known as the Inflation Reduction Act, should make renewable energy systems more profitable.
Such a development would clearly benefit NextEra Energy due to the large amount of wind energy and solar energy systems that it owns. Arcaro’s $99 price target looks particularly attractive as NEE currently trade around $80.
NextEra Energy is also interesting because of the largest utility that it owns, Florida Power & Light or FPL. FPL accounted for $4.425 billion of the firm’s $5.183 billion of revenue in Q2.
Those $5.183 billion of revenue were far higher than the $3.927 billion of sales that NextEra reported during the same period a year earlier.
And its utilities should become more attractive to investors seeking traditional value names as recession fears mount.
Ormat Technologies (ORA)
Ormat Technologies (NYSE:ORA) is arguably not as well-known as ALB or NEE. I certainly hadn’t heard of Ormat until recently. That said, Ormat Technologies, which specializes in geothermal energy, is interesting. The Reno-based firm designs, builds, and supplies power-generating equipment that has been installed in energy plants in over 30 countries.
The firm derives 94% of its sales from geothermal-energy recovery. Geothermal is a reliable source of energy that is relatively stable compared to other renewables. After all, solar and wind create little or no energy a great deal of the time.
The stability and reliability of geothermal is reflected in the firm’s top line which has steadily increased from $436 million in 2016 to $586 million in 2021. Ormat Technologies’ gross margin has been in the low-40% range during the entire period.
Ormat Technologies accounts for 29% of U.S. geothermal generation, making it the nation’s second-largest producer of geothermal energy. The U.S. is the world’s largest geothermal-energy producer, with Ormat deriving 72% of its revenues from the U.S. market.
Ameresco (AMRC)
Ameresco (NYSE:AMRC), which seeks to reduce other firms’ costs by raising their energy efficiency and providing them with renewables, is worth investing in. The truth of that assertion is demonstrated by the company’s tremendous Q2 earnings report.
Ameresco ‘s revenues soared 111% YOY to $481.9 million. The massive spike of its sales caused its EPS to spike 135% YOY, while its EBITDA, excluding some items, jumped 75% to $60.3 million. Fundamentally speaking, AMRC is performing very strongly.
However, Ameresco’s shares fell immediately following the Fed’s latest 0.75 percentage point rate hike. That has brought its share prices down to a better entry point near $68.
The shares had been fully priced prior to the news, indicating that investors were bullish on Ameresco despite the prevailing economic conditions. The shares’ resiliency suggests that AMRC stock has the potential to perform well moving forward.
Clearway Energy (CWEN)
The sale of Clearway Energy’s (NYSE:CWEN) thermal business on May 1 produced a big return for the company, as it yielded a gain of $1.29 billion.
The deal also enabled Clearway Energy’s Q2 EPS to reach $5.49, versus Wall Street analysts’ average estimate of 49 cents.
Clearway Energy owns 7,710 megawatts of energy production capacity. Of that total, 5,238 MW are renewables. The company owns 3,285 MW of wind energy capacity.
There are indications that Clearway Energy will invest a large portion of the proceeds from the sale of its thermal business in wind energy. Last year, 32% of U.S. energy capacity growth was attributable to wind energy. That metric suggests that America’s utilization of wind energy should rise rapidly going forward, boosting CWEN stock.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners (NYSE:BEP) stock has fared quite well in 2022. From the beginning of the year through Sept. 22, it was essentially flat. In other words, it has suffered no losses while broad indexes like the S&P 500, down 21.5% during the same period, continue to falter.
Brookfield Renewable Partners owns and operates a portfolio of hydroelectric, wind, solar, and storage facilities in North America, South America, Europe, and Asia. So it’s a good buy for investors seeking a strong play on renewables.
In Q2, Brookfield invested $3 billion in projects while commissioning 1,000 megawatts of new power. Its net income turned positive in Q2, coming in at $1 million, up from a $63 million loss during the same period a year.
In the first half of the year, its net loss narrowed to $77 million, down from $196 million in the first six months of ‘21.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON) stock took it on the chin as the Fed raised rates another 75 basis points on Sept. 21. Its shares dropped from above $71 to below $64 in less than 24 hours following the news.
The company provides “intelligent power technologies enable the electrification of the automotive industry.”
The decline of ON stock isn’t too surprising since tech has accounted for an outsized portion of the stock market’s losses this year. Investors should ignore the short-term, negative catalysts, though, when it comes to ON stock because ON Semiconductor is a strong firm that operates in attractive sectors.
Its quarterly revenue recently crossed the $2 billion mark for the first time, creating a particularly strong signal, given the macro challenges.
On is well-positioned to grow rapidly along with the EV, automation, and renewable energy sectors. The company’s forward-looking approach has served it well and resulted in record revenues in Q2. It’s worth buying on the dip.
On the date of publication, Alex Sirois did not have (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.