These 3 stocks are poised to benefit from the massive energy transition

Ines Ferré

The energy transition involves technologies ranging from renewables like solar and wind to electrical grid upgrades for increased power demand.

While higher interest rates put pressure on the clean energy sector last year, surging electricity demands for everything from artificial intelligence to EV charging are expected to buoy the clean technologies industry.

Incentives from the government's Inflation Reduction Act (IRA) aimed at accelerating the transition to green, domestically produced technologies are also expected to lift the sector.

The following are three stocks that analysts believe are well positioned to benefit from the energy transition in the US.

Among renewables, First Solar has 31 Buy ratings, six Hold, and zero Sell recommendations. The Tempe, Arizona-based company is the largest supplier and domestic manufacturer of solar modules in the US, with a sales backlog extending beyond 2027.

“FSLR is ahead of the curve and has established a robust domestic supply chain and manufacturing footprint, making it a large beneficiary of the IRA. As a domestic producer, FSLR is also able to limit high-cost freight and avoid tariffs and import risk,” RBC Capital’s Christopher Dendrinos recently noted.

Goldman Sachs analysts are also bullish on the stock, seeing it as a beneficiary of utility scale projects' need to supply extra power for data centers and AI workloads.

“Companies will likely look domestically for their panels to be able to benefit from domestic content bonus. In some cases, FSLR even partners directly with companies that own the data centers such as Microsoft (MSFT),” said Goldman Sachs analyst Carly Davenport and her team.

Year to date, First Solar is up 14%.

The maker of wind turbines and natural gas turbines recently spun off from GE (GE). Analysts were impressed with the company’s first quarterly print as an independent company last month.

“GEV's product portfolio spans the value chain from energy generation to electron transportation and grid management, and we expect its addressable market to double by 2030 vs 2022 benefiting from increasing electricity demands and growing grid complexity,” said RBC Capital's Dendrinos. The firm has a $160 price target and Outperform rating on the stock.

Goldman Sachs also has a Buy rating on the stock with a $268 price target.

“We expect GEV to benefit from secular growth trends as demand for electricity accelerates,” said Goldman's analysts.

Year to date, Vernova is up 16%.

The $147-billion-market-cap company delivers retail- and commercial-use energy derived from renewables, natural gas, and nuclear.

"The re-domestication of industry in the US supported by public policy will drive the need for more electricity," said NextEra's CEO John Ketchum during the company's latest earnings call in April.

STANISLAUS COUNTY, CALIFORNIA - MAY 19: California Governor Gavin Newsom (R), former Mayor Antonio Villaraigosa (C), and Jim Shandalov, Vice President at NextEra Energy Resources walk along the construction of the Battery Energy Storage Systems (BESS) for the future site of Proxima Solar Farm on May 19, 2023 in Stanislaus County, California. The Governor unveiled legislation to speed up construction for a streamlined process and to expedite court review on legal challenges that often tie up projects. The project is expected to create 300 construction jobs and generate $35 million in local revenue. The project is expected to be operational by December, could power 60,000 homes in the surrounding region and can generate up to 210 megawatts of clean, renewable energy and 177 megawatts of better energy storage. (Photo by John G. Mabanglo-Pool/Getty Images)
California Governor Gavin Newsom (R), former Mayor Antonio Villaraigosa (C), and Jim Shandalov, vice president at NextEra Energy Resources, walk along the construction of the Battery Energy Storage Systems (BESS) for the future site of Proxima Solar Farm on May 19, 2023, in Stanislaus County, Calif. (John G. Mabanglo-Pool/Getty Images) (Pool via Getty Images)

Analysts see a surge in electricity usage stemming from artificial intelligence and data centers as a key growth driver.

"NextEra's unregulated renewable business NextEra Energy Resources (NEER) is uniquely positioned to capitalize on the growth of data centers," wrote Goldman Sachs' Davenport.

The stock has 17 Buy ratings, five Hold, and one Sell.

NextEra is up roughly 16% year to date.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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