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Renewable energy stocks are setting up for a rally, according to Oppenheimer. While investors may be concerned about the impact of interest rates and a potential recession on the industry, the Wall Street firm expects better-than-feared sales levels, especially in the United States. Clean energy stocks have underperformed the broad market this year, with the S & P Global Clean Energy Index down more than 2% year to date, compared to the S & P 500′ s gain of about 7%, as of Monday’s close. “Fears around softening demand seem misplaced given our view that power security will prove a more substantial driver of demand, particularly as [Inflation Reduction Act] support clarity emerges in coming weeks and new [European Union] emissions targets are addressed by country-specific programs,” analyst Colin Rusch wrote in a note Tuesday. He expects U.S. demand to continue to track to 10% growth in 2023, with potential for upside as the IRA ‘s credits are clarified. The legislation funnels billions of dollars into the country’s clean energy transition and battle with climate change. In addition, product performance improvements will help drive demand higher, Rusch said. Among the names he likes are Enphase Energy , SolarEdge Technologies and Sunrun. Enphase Energy provides components for solar systems and backup energy storage. While it rallied nearly 45% in 2022, it has dropped about 24% this year. When Enphase Energy reported earnings in February, it beat expectations for both the fourth-quarter results and first-quarter guidance. Adjusted earnings came in at $1.51 per share for the fourth quarter, compared to Wall Street’s estimate of $1.27 per share, according to FactSet. Revenue of $724.7 million topped the $706.8 million expected. Meanwhile, the company guided $700 million to $740 million in revenue for the first quarter, versus the $685.2 million expected. Rusch’s price target of $328 implies nearly 62% upside from Monday’s close. SolarEdge Technologies, on the other hand, is up 5.3% year to date through Monday. The solar company also beat Wall Street expectations when it reported earnings in February. Its fourth-quarter adjusted EPS of $2.86 came in well above the $1.54 anticipated by analysts, per FactSet. Revenue was $890.7 million, compared to the $879.7 million expected. The stock has about 28% upside, according to Rusch’s $383 price target. Sunrun’s stock is set for a big rally, according to the analyst. His $49 price target suggests a whopping 145% upside. Sunrun hit a 52-week low on March 17 amid concerns over the solar company’s exposure to Silicon Valley Bank. However, the stock has since rebounded. Shortly after SVB’s collapse, CEO Mary Powell told Bloomberg the company was able to access the $80 million it had in deposits at the bank. Still, shares of Sunrun are down nearly 17% year to date through Monday. — CNBC’s Michael Bloom contributed reporting.
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