The 7 Hottest Clean Energy Stocks To Own For 2023 And Beyond

Source: Shutterstock

These clean energy companies will take your portfolio into dark green territory

  • These are the hottest clean energy stocks for investors seeking long-term multi-bagger returns.
  • Albemarle Corporation (ALB): Increase in lithium conversion capacity to boost cash flow growth.
  • Rivian Automotive (RIVN): Backlog continues to swell, providing revenue visibility.
  • ChargePoint Holdings (CHPT): Massive addressable market in the U.S. and Europe.
  • Enphase Energy (ENPH): Innovator with an addressable market of $23 billion by 2025.
  • First Solar (FSLR): Strong growth should be sustained due to capacity additions.
  • Vestas Wind Systems (VWDRY): Wind turbine and services order backlog in excess of 50 billion euros.
  • Lithium Americas (LAC): Quality lithium mining assets with long-term cash flow potential.

Without doubt, clean energy is among the biggest investment themes for the next few decades. The addressable market for clean energy is huge, as it encapsulates renewable energy sources, electric vehicles, and several base metals. Many clean energy stocks have already delivered multi-bagger returns. However, it’s still not too late to create a portfolio of some of the hottest clean energy stocks.

Coming back to this sector’s addressable market, it’s expected that the size of the renewable energy market will be nearly $2 trillion by 2030. Similarly, the global electric vehicle market size is expected to be $1.1 trillion by 2030. Of course, there are associated industries that are positioned to benefit from these positive tailwinds.

The current year has been disappointing for growth stocks. While some clean energy stocks have shown subdued performance, others have surged. For undervalued stocks, I think this presents a good accumulation opportunity. For some of the hottest clean energy stocks that have surged in 2022, intermediate corrections can be used to gain or increase exposure.

Let’s discuss the reasons why these clean energy stocks are worth holding for 2023 and beyond.

ALB Albermarle Corporation $239.43
RIVN Rivian Automotive $22.61
CHPT ChargePoint Holdings $10.40
ENPH Enphase Energy $302.99
FSLR First Solar $155.66
VWDRY Vestas Wind Systems $9.11
LAC Lithium Americas $22.76

Albemarle Corporation (ALB)

Globally, government policies favor the adoption of electric vehicles. Thus, it’s not surprising that the demand for lithium has surged. An acute lithium shortage is anticipated over the next 10 years. As lithium trends higher, it’s among the hottest clean energy investment themes.

Albemarle Corporation (NYSE:ALB) stock, which trades at an attractive forward price-earnings ratio of 12.4-times, is worth considering. Lithium sales currently contribute 60% of the company’s revenue. For Q3 2022, Albemarle reported 152% growth in sales. Additionally, the company has also guided for a robust increase in adjusted EBITDA (280% to 300%) for 2022.

With higher realized prices in this particular commodity, Albemarle is expected to continue reporting healthy cash flows. Additionally, the company has been boosting its lithium conversion capacity. By the end of the year, Albemarle expects to increase capacity to 200ktpa. This will have a positive impact on the company’s growth, and therefore its valuation, through 2023.

Rivian Automotive (RIVN)

Among electric vehicle stocks, Rivian Automotive (NASDAQ:RIVN) looks to be among the most undervalued after a correction of 75% year-to-date in 2022. Throughout the year, Rivian has maintained its production guidance for 25,000 electric vehicles.

Further, the company’s order backlog for its R1 model has been swelling. As of November 2022, this backlog came in at 114,000 vehicles. Rivian also has a backlog of 100,000 electric delivery vans from Amazon (NASDAQ:AMZN), a key investor in the company.

Recently, Rivian pulled back on its plans to expand in Europe by partnering with Mercedes. Amid global growth concerns, the decision is likely to aid Rivian in curbing its cash burn. Rivian expects the company’s current cash buffer of $13.8 billion will fund operations through 2025. Therefore, there is no dilution concern for investors, at least in the immediate future.

Rivian expects to launch its more affordable R2 modelin 2026. The company anticipates that R2 will unlock its global market opportunity, given its more aggressive pricing. With ambitious long-term plans, RIVN stock is worth holding at these levels.

ChargePoint Holdings (CHPT)

Sticking with the EV segment, for a minute, I think ChargePoint Holdings (NYSE:CHPT) stock is worth putting in this portfolio of the hottest clean energy stocks. That’s because alongside the massive market potential electric vehicles bring, the addressable market for EV charging infrastructure is just as massive.

The growth potential of this sector is truly something investors should note. It’s expected the United States will need $40 billion in investment in publicly-accessible charging infrastructure by 2035. Europe is expected to need 65 million EV chargers by 2035, requiring a total investment of $134 billion. Clearly, the best years of growth are still ahead for EV charging companies.

ChargePoint seems will-positioned to benefit, given the company’s strong presence in the U.S. At the same time, the company is aggressively expanding in Europe, with a presence in 16 markets.

The company’s business model is also interesting. ChargePoint sells hardware, subscription software and services. As the number of charging stations installed swells, software subscription revenue will swell. This will boost ChargePoint’s long-term EBITDA margin, making its current valuation look very cheap.

Enphase Energy (ENPH)

Solar energy is also expected to be a big investment theme in the coming decade. Accordingly, it may be no surprise to some investors that Enphase Energy (NASDAQ:ENPH) has not been impacted by broader market challenges. In fact, ENPH stock has surged 80% higher for year-to-date 2022. Thus, this company really is an outlier, given the bearish trend most stocks are in right now.

Considering the company’s growth potential, I expect ENPH stock to remain in an uptrend. Investors should consider adding exposure to the stock on intermediate corrections.

That’s partly because this company’s stock price appreciation coincides with its fundamentals. In Q3 2022, Enphase reported revenue of $634.7 million. For the same period, the company reported free cash flow of $179 million. This already implies annualized free cash flow potential of $700 to $800 million. Considering its growth trajectory, Enphase is positioned to deliver free cash flow in excess of $1 billion in 2023. This is a big reason to like the stock.

Given the company’s business is already a cash flow machine, Enphase’s focus on global growth is very attractive. The company believes that it has a serviceable addressable market of $23 billion by 2025. Enphase is also high on innovation, currently holding 250 patents globally.

It’s also worth noting that Enphase has pursued three acquisitions in 2022. With an increasing cash buffer, acquisitions will add to the company’s growth momentum over time.

First Solar (FSLR)

In 2020, the International Energy Agency confirmed that the world’s best solar systems provide the “cheapest electricity in history.” That’s a major reason to focus on solar energy names in this list of the hottest clean energy stocks to buy. First Solar (NASDAQ:FSLR) continues to look attractive after a rally of 80% year-to-date 2022. Of course, investors need to wait for intermediate corrections to add more exposure.

It’s worth noting that First Solar has long-term expansion plans which will ensure healthy revenue and earnings growth. The company expects to end the year with capacity of 9.7GW. Given its strategic direction, First Solar has indicated this capacity will increase to 21.7GW by 2026.

The company’s potential booking pipeline also looks robust. First Solar believes that it has total booking opportunities of 113.6GW. The company’s current module shipment backlog stands at 58GW. Thus, as its backlog swells, FSLR stock is likely to trend higher.

First Solar ended Q3 2022 with cash and cash equivalents of $1.9 billion. Thus, the company’s financial flexibility remains strong as it looks to expand in the coming years.

Vestas Wind Systems (VWDRY)

In the business of wind energy, Vestas Wind Systems (OTCMKTS:VWDRY) stock is among the best bets. In the last month alone, VWDRY stock has witnessed a rally of 21%. I believe that this positive momentum is likely to be sustained into 2023.

For Q3 2022, the company’s revenue declined by 29% on a year-on-year basis, due to project delays. However, Vestas has a strong wind turbine backlog of 18.1 billion euros. This provides long-term cash flow visibility, something investors clearly like.

Additionally, Vestas reported services agreements that provide a contractual revenue backlog of 32.8 billion euros. Therefore, the company’s combined revenue visibility is in excess of 50 billion euros. With positive industry tailwinds, it’s likely that Vestas’ backlog will continue to swell. Strong global presence will also help in boosting its backlog on a sustained basis.

On the flip-side, the company’s EBITDA margin has been negatively impacted due to supply chain challenges and cost inflation. However, these headwinds a temporary, and Vestas is positioned to deliver healthy free cash flows in the years to come.

Lithium Americas (LAC)

Lithium Americas (NYSE:LAC) is another lithium play that’s worth considering because of its quality assets. On a year-to-date basis, LAC stock has declined by 22.4%. However, as the company plans commencement of mining activity at key lithium mines in 2023, there is reason to be bullish.

Lithium Americas has assets in the United States and Argentina. Recently, the company announced a split into two entities. Lithium Americas will continue to focus on the U.S. asset where the company has a 100% interest. Further, Lithium International will focus on the asset in Argentina where the company has 44.8% operating interest. The split is a potential value-unlocking opportunity.

Another notable point to make about these mines is the long-lived nature of these assets. The company’s U.S. mine has a reported reserves which should last 46 years. With lithium prices likely to remain firm, this is another company with clear cash flow visibility for the next decade and beyond.

This post originally appeared at InvestorPlace.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.