As the globe transitions away from fossil fuels, renewable energy will play a more important role, and recent dips in clean technology companies give an attractive entry point.
We expect distributed energy production and storage to expand and intensify in the years ahead, and that owning strong energy firms aligns with this trend, the investment banking business noted in a research note to clients. “We foresee further growth in distributed solar systems, particularly now that storage has become economic.” Guggenheim reports.
Despite the increase in the size of the solar sector, Guggenheim said that the retreat presents a “attractive opportunity” to invest in a select group of quality brands.
Guggenheim’s best idea in space is out of the ordinary and not a traditional solar play. The company favors Generac the most. Residential backup power systems are provided by the company, and it is expanding into the residential solar and storage markets. Due to ongoing power grid failures, including one in Texas earlier this year, consumers are increasingly turning to companies like Generac to ensure power.
“The company’s branding and dealer network serve as an excellent springboard for additional home sales.”
Guggenheim analysts led by Joe Osha wrote, “GNRC is leveraging its strength with the introduction of home energy storage and solar inverter products.” He forecasts that the company, which is also making inroads in commercial markets, will generate $3.5 billion in revenue in 2021, representing a 53 percent increase year on year.
Generac has a buy rating and a $420 target price, which is 31% higher than where the stock closed on Wednesday.
Guggenheim also sees a bright future for residential installers Sunrun and Sunnova, which it rates as buys.
The former is the largest residential solar player in the United States, which Guggenheim believes positions the company for success as the market grows. “As the residential solar industry grows in size and sophistication, so do the benefits of scale, and RUN is capitalizing on those advantages. RUN is using its position to drive additional growth and market share gains across the board, from access to capital markets to procurement to go-to-market strategy,” Osha said. He went on to say that the company’s large subscriber base provides revenue visibility over the life of solar contracts.
Guggenheim expects the stock to rise 30% to $56. Nonetheless, the target is well below the stock’s all-time intraday high of $100.93 set on January 12.
Sunnova, according to the firm, has shown “remarkably rapid growth,” prompting Osha to forecast 2021 installation volumes that nearly double those of 2020.
Sunnova’s dealer-based business model, according to Guggenheim, has aided its rapid expansion, and the firm expects high growth levels into 2020 as well.
“As the company expands into new markets, NOVA should be able to continue adding subscribers…
“We believe we are only at the start of a major shift, with home resilience, grid services, neighborhood microgrids, and additional services driving incremental revenue,” the firm stated. Guggenheim’s $51 target is 80% higher than the stock’s closing price on Wednesday.
Osha prefers SolarEdge, which he rates as a buy, when it comes to solar inverter companies. On competitor Enphase Energy, he has a neutral rating.
“Competitors vastly underestimated the difficulty of developing small, robust power management technology.” “SolarEdge and Enphase are now far ahead of the competition,” he said, noting that the two companies control roughly half of the total addressable market.
SolarEdge’s storage offering, according to the company, could be a catalyst, and its separate optimizer and inverter structure is well-suited to large residential systems and commercial applications. According to Guggenheim, SolarEdge’s potential in new markets and products is not currently reflected in the stock’s valuation. The firm’s $314 target is 27% higher than Tuesday’s close.
Enphase is a term that has a lot of different meanings depending on who you Guggenheim predicted that the company’s market share gain in the residential market would continue, but warned of high costs due to supply chain disruptions. In order to scale commercial products, the company may have to lower prices, which could lead to margin erosion. Given this, the firm believes the stock is fairly valued.