Clean energy stocks have seen significant declines over the past year, and
Citigroup
strategists are cautioning about a handful that could decline even further.
The largest clean energy exchange-traded fund,
iShares Global Clean Energy
(ticker: ICLN), and its much smaller peer, the
Invesco Global Clean Energy ETF
(PBD), are down by roughly 25% over the past year. Both funds had gained mid-last year with the passage of the Inflation Reduction Act, which allocated billions of dollars to support clean energy initiatives.
Languishing demand is one reason behind the recent selloff. Solar-power equipment firm
Enphase Energy
(ENPH), one of the largest holdings within the iShares fund, has repeatedly cautioned shareholders that demand is waning as high interest rates make customers cut back spending.
Citi’s Drew Pettit and Scott Chronert wrote Friday the stocks most at risk of seeing further losses within the clean energy universe are those with the “most evident declines in cash and negative free cash flow.”
To come up with their list, the strategists looked at clean energy stocks globally and picked those with the most noticeable free cash flow decline as well as cash burn or spending for the previous 12 months.
The eight companies that made their list are:
Clean fuel cell companies
Plug Power
(PLUG), which recorded a cash burn of almost $2 billion, and
Ballard Power Systems
(BLDP) which experienced a decline of $188 million.
Electric vehicle-related stocks
Rivian Automotive
(RIVN), running down $4.7 billion,
ChargePoint Holdings
(CHPT), depleting cash by $152 million, and
Fisker
(FSR), down $387 million.
Solar companies
SunPower
(SPWR), with a cash burn of $384 million, and
Sunnova Energy International
(NOVA), down $21 million.
And the energy company
ACEN
(
ACEN
), which depleted its cash reserves by $33 million.
Rivian,
Plug Power,
Ballard Power Systems,
Fisker,
SunPower,
and ACEN didn’t respond to a request for comment.
ChargePoint declined to comment. Sunnova pointed Barron’s to Chief Financial Officer Robert Lane’s remarks in July that said the company is increasingly investing on software development but anticipates the rate of increase of expenditures to reach its peak by year-end.
The Citi strategists acknowledge a decline in interest rates, among other factors, could help the stocks move upward. But “we believe…stock selection within this subcategory should be considered very carefully.”
Alternatively, Citi puts
Renault
(RNO.FR) among its selection of clean energy stocks poised for significant gains when the sector gains more widespread acceptance. BofA Securities Global Research team last month put out a list of stocks that could benefit from increased federal spending on clean energy. It includes wind energy player
TPI Composites
(TPIC) and Sunnova.
Write to Karishma Vanjani at [email protected].
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