How Are Green Energy Stocks Faring This Year?
Our theme on Renewable Energy Stocks – which includes U.S.-based solar panel manufacturers, lithium miners, and hydrogen fuel cell producers – has gained about 2% year-to-date in 2023, compared to the S&P 500 which remains up by about 4% over the same period. Although the theme has underperformed, there have been multiple positive developments for the sector.
The biggest tailwind for the sector comes from the Inflation Reduction Act, which was signed into law last August and carries about $370 billion in subsidies and credits for clean energy investment. The incentives have resulted in a flurry of new clean-energy project announcements in areas including solar, and wind energy developments as well as battery manufacturing. Moreover, fourth-quarter earnings from many renewable players have been very strong. For instance, solar micro inverter maker Enphase Energy (NASDAQ:ENPH) saw revenue top estimates rising by 75% year-over-year to $724.65 million, while solar panel manufacturer First Solar (NASDAQ:FSLR) too beat earnings estimates. There are some other macro factors that could help the renewables theme. Inflation has been cooling, and the Federal Reserve has scaled back on the pace of its interest rate hikes. The most recent hike stood at 0.25%, down from multiple rate hikes of 0.75% last year. Although the federal funds rate is at a multi-year high, a slower pace of rate hikes is a net positive for renewable project financing.
Within the theme, First Solar has been the strongest performer, with its stock rising by 40% year-to-date. On the other side, NextEra Energy (NYSE:NEE), one of the largest U.S. utilities by market cap and the single largest owner of solar generation capacity outside China, has been the weakest performer with its stock down by about 11% year-to-date.
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| Returns | Mar 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| FSLR Return | 24% | 40% | 555% |
| S&P 500 Return | 2% | 5% | 81% |
| Trefis Multi-Strategy Portfolio | 4% | 11% | 249% |
[1] Month-to-date and year-to-date as of 3/6/2023
[2] Cumulative total returns since the end of 2016
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