Here are JPMorgan’s top clean energy picks for the rest of 2024
According to JPMorgan analysts, the clean energy sector faces a volatile second half of the year as interest rates are expected to stay higher for longer and the US presidential election creates uncertainty. there is uncertainty about what future regulations will look like. However, the industry is benefiting from growing tailwinds as the role of renewable energy in powering data centers remains underappreciated and the advantages from the Disinflation Reduction Act Inflation is not yet fully reflected in stock prices, analysts told clients in a research note Thursday. JPMorgan’s top picks for the rest of the year are two smaller, lesser-known companies – Hannon Armstrong Sustainable Infrastructure and TPI Composites. Hannon Armstrong funds renewable projects and TPI makes blades for wind turbines. The investment bank sets a $39 price target on Hannon Armstrong, implying a 21% upside from Thursday’s close of $32.13. TPI has an $8 price target, suggesting an upside of about 90% from the latest close of $4.23. These two stocks have increased about 30% and 40%, respectively, in the past three months. According to JPMorgan, Hannon Armstrong is well suited to the current interest rate environment because the company can operate the yield curve in either direction. When long-term Treasury rates are higher than short-term rates, Hannon Armstrong can subscribe to projects at higher interest rates but finance them at lower rates. According to analysts, when yields are inverted as they are now, Hannon Armstrong will add fewer projects but generate income from securitization. JPMorgan analyst Mark Strouse and his team told clients: “We believe the company’s diverse asset portfolio, securitization flexibility and large addressable market will help The company is in a good position to grow.” Meanwhile, Hannon Armstrong currently pays an above-average market yield of 5.2%, according to FactSet data. Profits hit TPI Composites’ profitability has been hit by the wind energy downturn as higher interest rates increase financing costs. But JPMorgan expects more information on volumes and the company’s profit recovery in the second half of the year as contracts are booked and client demand improves. “We continue to recommend TPIC to highly appreciative investors seeking exposure to the Alt Energy space,” Strouse and his team told clients. “We expect TPIC to perform better than average across our coverage over the next 6-12 months.” On the solar front, JPMorgan still sees utility-scale projects seeing the highest demand, with Nextracker and First Solar being standout stocks, while the residential sector remains lackluster as companies remain is addressing congested inventory channels. Solar stocks are up sharply this week with First Solar up 26% through Thursday and Nextracker up 16%. JPMorgan raised First Solar’s price target by $22 to $262, implying a 4% upside from Thursday’s close. Nextracker’s price target remains at $63, suggesting a 23% upside from the last closing price of $51.32. The investment bank puts Nextracker’s compound annual growth rate over the next five years in the mid-teens as the leading provider of proprietary sun trackers with exposure to the utility market. According to JPMorgan, First Solar already has a multi-year backlog of orders, which provides a buffer, and the company is expected to see stronger bookings after 2026. While First Solar has becoming the darling of the solar space, JPMorgan still notes some clouds on the horizon. “We expect competition to increase entering the U.S., eroding FSLR’s competitive advantage, which we believe will likely pressure the multiples sought by investors,” Strouse said. attributed to core business activities”.
