UBS is initiating coverage of a key renewable energy company with a buy rating thanks to projects it’s involved in that will benefit from the Biden administration’s environmental efforts. The firm has a price target of $60 on Ameresco , which represents 47% upside against the stock’s Monday closing price of $40.78. So far this year, the company has lost about 18%. Ameresco is a diversified player in the renewable space with projects that range from solar power to landfill gas capture to battery storage. UBS analyst William Grippin said the company is poised to gain from the Inflation Reduction Act, but delays in implementing the program are weighing on its results. AMRC YTD mountain Shares of energy company Ameresco have declined roughly 18% from the start of 2023. “In the short-term, we see potential for project pushouts as customers await Treasury Department clarity on the mechanics of specific IRA provisions, and assess the potential impacts on project economics in tandem with higher interest rates,” Grippin said. “While this presents a near-term risk for AMRC, we ultimately expect the IRA to drive increased demand and lower project costs.” The company missed quarterly earnings targets on Monday, after it posted earnings of 3 cents per share, excluding items. Analysts polled by FactSet had forecasted 6 cents per share in profits. Grippin said the company’s lackluster performance so far this year is a buying opportunity for investors, because Ameresco’s slow growth is tied to near-term issues. “In our view, concerns over near-term growth headwinds have driven a ~27% YTD decline in AMRC shares, providing investors with an attractive entry point to owning an ESCO (energy services company) market leader with strong long-term growth tailwinds,” he said. Grippin added that the company is currently in the process of doing away with a one-time battery project that could amount to a near-term hit to the business. “While we expect new projects growth will backfill a portion of the decline, no new projects of similar size have been announced and thus we expect the completion of the [Southern California Edison] project to result in a short-term decline in this business,” he said. — CNBC’s Michael Bloom contributed to this report.
