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As artificial intelligence (AI) continues to fuel massive power demand, traditional fossil fuels won't be sufficient to keep the grid humming, according to analysts at Mizuho Securities. Along with major contributions from natural gas (NGU24), the brokerage firm expects alternative energy sources - including wind and solar - to supply more than 50% of domestic electricity needs by 2030.
Given that bold forecast, here are three clean energy stocks that Mizuho expects to benefit from skyrocketing AI energy demand.
#1. First Solar
Founded at the turn of the century in 1999 and based out of Arizona, First Solar (FSLR) is a multinational solar panel manufacturer with facilities in the U.S., Malaysia, and Vietnam. The company pioneered the development of Cadmium Telluride (CdTe) thin-film photovoltaic (PV) modules, which offer several advantages over traditional silicon-based modules. These panels are known for their higher efficiency, lower cost, and greater durability, making them a popular choice for solar projects worldwide. FSLR currently commands a market cap of $24.96 billion.
FSLR stock has had an impressive run in 2024 so far, rising 36% on a YTD basis.
First Solar's most recent quarterly results came in ahead of Wall Street's expectations. While net sales rose by 24.6% from the prior year to $1 billion, Q2 EPS more than doubled to $3.25, while also surpassing the consensus estimate of $2.70. Notably, this was the fifth consecutive quarterly earnings beat from the company.
Net cash from operating activities took a turn for the positive this year, as FSLR reported an inflow of $460.74 million compared to an outflow of $124.28 million in the prior year. Overall, the company closed the quarter with a cash balance of $1.7 billion, much higher than its long-term debt levels of $418.73 million.
First Solar, as the leading U.S. manufacturer of solar panels, is poised for significant growth. The company plans to increase its production capacity to over 14 gigawatts by 2026, up from 6 gigawatts currently. This expansion, driven by increased manufacturing capacity and a clear growth strategy, will boost revenue and solidify First Solar's position as a global leader in the solar industry.
The clean energy stock is currently trading at a forward price/earnings (P/E) ratio of 17.26, which is a discount to the tech sector median and its own 5-year average. This suggests that FSLR is trading at a discount right now compared to its expected earnings growth.
Analysts have a consensus rating of “Strong Buy” for FSLR stock, with a mean target price of $290.36. This denotes an upside potential of about 24.1% from current levels. Out of 31 analysts covering the stock, 23 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 7 have a “Hold” rating.
#2. GE Vernova
Established in 2024 by its spin-off from parent company and legendary conglomerate General Electric, GE Vernova (GEV) is a leading global energy company focused on providing essential technologies and services to help customers meet their energy needs. The company's core businesses include renewable energy, power generation, and grid solutions. Its market cap currently stands at $49.91 billion.
GE Vernova's integrated approach to power generation, encompassing both upstream and downstream operations, has made it a global leader. The company's products and services are used in over 100 countries, powering approximately 30% of the world's electricity.
GEV's second-quarter results were a mixed bag, as EPS managed to top expectations, while revenues fell short. Total revenues rose 1% to $8.2 billion, while the company reported an adjusted profit of $0.71 per share for the period.
Cash flow from operating activities reached $978 million in Q2, a stark improvement from the previous year's outflow of $288 million. Overall, GE Vernova's liquidity position remained robust at the end of the second quarter, with a cash balance of $5.8 billion, much higher than its total debt of $979 million.
GE Vernova's prospects are bright, driven by strong growth in its Power unit. Orders for the Power unit increased by 30% in the second quarter of 2024 compared to the same period in 2023. The gas unit within Power was particularly successful, generating $4.5 billion in revenue and experiencing a 70% increase in equipment orders. Additionally, the backlog for the company's electrification business grew by 35%.
Analysts have deemed GEV stock a “Moderate Buy,” with a mean target price of $199.57 - which indicates an expected upside potential of roughly 7.5% from current levels. Out of 14 analysts covering the stock, 8 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 4 have a “Hold” rating.
#3. Nextracker
Nextracker Inc. (NXT), an energy solutions company, provides solar tracker and software solutions for utility-scale and distributed generation solar projects in the U.S. and internationally. It is the leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world.
Nextracker's dedication to innovation has been instrumental in its success. The company has doubled its R&D investments in recent years and opened a new R&D center in India, complementing its existing centers in Brazil and Silicon Valley. These efforts have resulted in the development of a tracker with a significantly reduced carbon footprint, which has been well-received by customers.
Additionally, Nextracker's intelligent energy yield maximization software, TrueCapture, is continuously updated through automatic over-the-air updates to ensure optimal performance.
NXT's market cap is currently $6.12 billion, and NXT stock is down 11.3% on a YTD basis.
In its results for the latest quarter, Nextracker beat Wall Street's expectations on both revenue and earnings. The company reported revenues of $719.9 million in Q1 of FY25, marking a 50% growth from the previous year, while EPS jumped even more sharply, up 94% to $0.93, coming in well ahead of the consensus estimate. This was NXT's fifth consecutive quarterly earnings beat.
Net cash from operating activities fell 46.5% to $120.85 million, but its cash balance of $471.9 million was up by nearly 33% year over year, and much higher than its long-term debt levels of $142.2 million.
NXT stock is trading at a forward P/E of 13.74, which is a discount to the sector median. Similarly, the stock is priced at 12.57x forward cash flow, which indicates that NXT is a reasonably valued growth stock at current levels.
Analysts have an average rating of “Strong Buy” for the stock, with a mean target price of $61.16, which indicates an upside potential of about 47.1% from current levels. Out of 27 analysts covering Nextracker stock, 21 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 5 have a “Hold” rating.
