Top renewable energy stocks to watch

Renewable energy still has plenty of growth opportunity

Despite the global lockdowns that came with the emergence of the Covid-19 pandemic, it’s evident that there’s been rapid growth in wind and solarphotovoltaic (PV) as renewable energy sources.¹

According to the International Energy Agency (IEA), the United Nations Change Conference (COP26) held in November 2021 shone the spotlight on the reduction of carbon emissions and the use of clean energy. COP26 goals for 2030 include accelerating the phasing out of coal as an energy source, preventing deforestation, speeding up the switch to the use of electric vehicles and encouraging investment in renewables.²

In 2021, China was the global leader in renewable energy installations, and according to IEA predictions this’ll continue for the foreseeable future.¹ However, an increasing number of emerging markets are following suit.

Mobilising the world to be on track with COP26’s target of net zero emissions by 2050 will need an investment of $4 trillion a year by 2030. This’ll allow for the accelerated transition into clean energy.

There’s huge growth expected in clean energy technologies over the next decade in IEA’s Net Zero Emissions by 2050 Scenario (NZE), which is likely to lead to this renewables market being worth a cumulative $27 trillion by 2050.¹ The combined renewable energy market includes wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells.

It’s predicted that by 2050, there’ll be about three billion electric vehicles (EVs) globally, which‘ll require three terawatt-hours (TWh) of battery storage. This’ll see batteries grab 60% market share in the clean energy technology equipment sector.¹

^{Source: International Energy Agency, 2018}

Generating electricity will remain the main use case for renewables, which is expected to account for almost 30% of global electricity demand by 2023. Hydropower is expected to be the biggest contributor, accounting for 16% of global electricity demand, followed by wind at 6%, solar at 4% and bioenergy at 3%.

The IEA says around 70% of the new power generation capacity to come online in the period up to 2023 will be powered by renewables, led by solar and followed by wind, hydropower and bioenergy.

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Top 5 renewable energy stocks: RENIXX-World stocks

The Renewable Energy Industrial Index (RENIXX) is a global index that tracks the 30 largest renewable energy companies by market cap, worldwide.

Some of these companies have diverse portfolios like wind energy, solar energy, hydropower, geothermal energy, bioenergy or fuel cell technology, while others concentrate solely on one power source, such as solar.

Many of the largest players are highly cash-generative, profitable and dividend-paying, and offer relatively stable business models that benefit from reliable revenues sourced from regulated markets.

We share the top 5 renewable energy stocks in more detail below. Note that these stocks have not been chosen as the largest renewable energy shares in the world alone, but rather based on various factors including market cap, future growth prospects, dividends and latest results. This list was last updated on 28 April 2024.

1. Tesla
2. Verbund
3. Ørsted A/S
4. Nextracker Inc
5. Iberdrola

Keep in mind that despite the global positive shift towards clean energy, this high growth and highly competitive industry can be volatile – resulting in drastic price swings. Keep abreast of news coverage around the sector and these companies when you’re looking to take a position, or are already holding a position on a stock.

You can take a position with us, whether the share price is rising or falling.

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Tesla

Shares in US-based electric vehicle (EV) and clean energy company Tesla have been something of a mixed bag over the past few years — rocketing to as much as $407 in November 2021 and correcting to just $176 today.

The company run by Elon Musk makes world class electric vehicles and associated software, including the software for fully autonomous cars. And, with fossil-fuelled vehicles set to be phased out by governments around the world over the coming years, EVs are likely to be the future.

The shares trade on an eye-watering price earnings ratio of around 45, and the company may have reached somewhat of an inflection point. For context, BYD accelerated past Tesla to claim the title of the world's biggest seller of EVs in 2023's fourth quarter, selling about 530,000 vehicles to Tesla's 485,000.

The company reported $1.1 billion in net income in the first quarter of 2024, down 55% compared to $2.5 billion in the same period in 2023. Revenues fell by 17% to $17.4 billion (from $20 billion last year) and operating margins slipped by 592 basis points due to discounting. Management admits that EV sales are "under pressure" as car manufacturers favour hybrids over electric vehicles.

The company also said the Red Sea attacks hit revenues and was also affected by an arson attack at its Gigafactory in Berlin. Tesla is making redundancies in Germany. It is also busy cutting costs and has reduced its subscription fee and purchase price on its models.

Meanwhile, Musk, who is investing heavily in AI and autonomous vehicles, previously revealed plans to bring the production of new models forward, to ‘early 2025, if not late this year.’ This — alongside continued AI advances in the self-driving arena — could drive revenue back to growth in short order.

Verbund

Shares in Verbund, Austria’s biggest electricity producer, were hit by recent energy price falls, higher interest rates and concerns over regulatory uncertainty in Europe and fell sharply last year. The company posted a profits warning, admitting that its earnings forecasts for 2024 would not meet analyst expectations due to the fall in wholesale electricity prices and the cost of emission allowances. However, the shares have since begun to recover some ground and are up 5% so far this year.

First quarter revenues fell by 38% to €2 billion (from €3.3 billion in the first quarter of 2023). However, it’s worth noting that EBITDA (earnings before interest, tax, depreciation and amortisation) only fell by 8.7% to €883 million (from €967.3 million last year).

The shares yield nearly 6% and trade on a price earnings ratio of just 11. The company produces 33 billion kilowatts of electricity a year from hydropower in Austria and Germany. Around two-thirds of Austria’s electricity now comes from harnessing energy from water, and Verbund supplies the majority of this there and in Bavaria. Concerns over the possible redesign of the electricity market across the European Union – ie. government clawbacks – have also weighed on the shares.

However, long term Verbund is well placed to benefit from the growth in renewable energy. Meanwhile, the company is investing heavily in clean energy infrastructure across Europe - including hydrogen - and should play a key part in the switch to renewable energy there.

Ørsted A/S

Danish company Ørsted A/S Ørsted A/S and its investors have had a rough 12 months. Shares in the renewable energy provider, one of the world’s leading offshore wind energy providers and one of the biggest renewable energy firms by capacity, nearly halved. This came after it walked away from a handful of projects, experienced problems in its US operations and was hit by the effects of higher interest rates.

The company took DK 28.4 billion ($4 billion) of impairment charges in November after it stopped work on two projects off the coast of New Jersey in the US. Ørsted has projects in the UK, Ireland, Germany, the Netherlands, Taiwan, and the US. The UK is its biggest wind market with 5.6 GW of installed capacity. Chief executive Mads Nipper says the company is working hard on cutting its cost base to turn the business around.

Last year it won a contract from the UK government for the world’s biggest offshore wind farm – the Hornsea 3 off the coast of Yorkshire. The project will have a capacity of 2,852 MW – enough to power 3.2 million homes in the UK. It has since also won planning consent for a further project, Hornsea 4, which will be one of the world’s biggest wind farms with a capacity of 2.6 gigawatts.

Construction continues on the Greater Changhua project in Taiwan – another of the world’s biggest offshore wind farm projects. The shares are down 33% over the past year and may be worth looking at for the recovery prospects. At the recent half-year results operating profits rose 8% to DKK 7.5 billion.

The company is committed to green energy, with a target of 98% reduction in its CO2 emissions by 2025.

Nextracker Inc

Nextracker floated on Nasdaq last year. The company operates in the solar energy market, providing the software and integrated solar tracker technology for major solar generation projects. Its products, including NX Horizon and NX Gemini, enable customers’ solar panels to follow the movement of the sun, optimising their performance. This includes coping with common challenges such as uneven ground and issues such as extreme weather.

Q3 results saw Nextracker’s revenue rise by 38% year—over-year to $710 million, driving adjusted EBITDA up an impressive 168% to $168 million. It also reported a record backlog, with continued demand strength globally.

‘Nextracker achieved a record third quarter, outperforming across revenue, profit and backlog, which reflects strong execution and spotlights our capability to meet customer requirements. Underpinned by product differentiation that is gaining momentum in the marketplace, we are raising our annual guidance once again,’ said Dan Shugar, Founder and CEO of Nextracker. ‘As the world transitions to renewable energy and with solar leading new power generation, we are well positioned as the global leader in trackers, and we’re just getting started.’

Iberdrola

Spanish utility firm Iberdrola, formed in 1870, operates in the solar, gas, nuclear and wind energy sectors. It produces electricity from onshore wind, offshore wind and hydro. It has been busy increasing its solar capacity in the European market, especially in the UK and Spain.

In 2022, it invested £500 million in solar, buying up 17 solar projects in the UK through subsidiary Scottish Power. Its renewable capacity stood at over 42,000 MW at the end of 2023.

It is also working on 31 GW of new solar projects in Spain, US, Mexico, the UK, Portugal and Italy. It aims to increase its PV capacity to 14 GW installed by 2025 it plans to increase its PV capacity to 14 GW installed by 2025. Meanwhile, 20 new onshore wind turbines were installed in Zamora, Spain and a hydroelectric plant is being built in Portugal.

It recently cancelled its $8 billion deal to buy US company PNM Resources. The acquisition would have made its Avangrid subsidiary into one of the largest US utilities firms. The deal had struggled to gain traction following the rejection of it by one US regulator in 2021 and various legal battles had ensued. On the bright side, changing tack will mean Iberdrola’s debts do not balloon to what could have been an estimated $55 billion, as analysts at Goldman Sachs have pointed out. Analysts at the investment bank suggested that the rise in interest rates had made the deal less attractive.

In Q1 results, the business saw profits rise from €1,485 million to €2,760 million, while EBITDA increased to €5,857 million. Further, 100% of 2024 volumes have already been sold.

The shares are up 45% over the past five years to €12.04 and trade on a price earnings ratio of 13. They also yield 4.6%. Analysts at broker UBS currently have a buy recommendation on the stock.

RENIXX-World stocks constituents

Here’s a list of all of the constituents of the RENIXX-World index:

Top renewable shares to watch summed up

These are just some of the best renewable shares available to watch - there are many others. Always do your own research. Past performance is not a guide to future returns.

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Sources:

¹ The International Energy Agency, 2021
² COP26, 2021