Goldman Sachs Picks Renewable Energy Stocks to Buy Now

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Jun. 15 2021, Published 8:59 a.m. ET

Renewable energy stocks have been on a rollercoaster ride over the last year. 2020 was a pivotal year for renewable energy stocks after green energy proponent Joe Biden was elected as the 46th U.S. president. However, renewable energy stocks are having a tough time in 2021 despite starting the year on a positive note. Goldman Sachs has picked some renewable energy stocks. Should you buy the stocks?

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The global pivot towards green and renewable energy got a boost when President Biden reversed Trump’s decision and rejoined the Paris Climate Deal. The administration is also proposing billions of dollars in renewable energy and electric vehicle infrastructure investments.

Goldman Sachs on renewable energy stocks

According to Goldman Sachs analysts, the TAM (total addressable market) of renewable energy would double by 2030. While renewable energy stocks are underperforming oil and gas companies in 2021, Goldman expects things to get better for the sector.

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“We think attractive regulatory frameworks, creative technological and financial innovations, and consistent flows into ESG funds could help boost the performance of former market favorites,” said Goldman Sachs analysts in their note.

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As ESG investing gains traction, several funds are shunning fossil fuel businesses. Some diversified miners have exited their coal operations in order to lower their carbon footprint.

North America renewable energy stocks

Goldman Sachs has identified renewable energy stocks in North America, Asia, and Europe. The following are the renewable energy stocks that Goldman Sachs has identified in North America.

  • NextEra Energy Partners
  • Brookfield Renewables 
  • Array Technologies
  • Canadian Solar
  • Emera
  • Avangrid
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nextera energy inc nee stock valuation
Source: TIKR

NextEra stock valuation

Best renewable energy stocks to buy now

The business case for renewable energy looks strong. The global shift from nonrenewable energy to renewable energy sources is for real and the transformation has gained momentum since President Biden won the election.

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Looking at the renewable energy stocks identified by Goldman Sachs, NextEra Energy is the world’s largest solar and wind energy producer. It reported revenues of almost $18 billion in 2020 and is profitable. It trades at an NTM (next-12 month) PE ratio of 28.9x.

Brookfield Renewable has 62 percent of its portfolio in hydroelectric facilities. It posted revenues of $3.83 billion in 2020. However, it posted a net loss in the year. The stock trades at an NTM EV-to-sales multiple of 13.1x.

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Meanwhile, Array Technologies went public in 2020 in what was an incredible year for green energy companies. It develops and manufactures ground-mounting systems for large-scale solar energy products. The stock trades at an NTM PE ratio of 37.3x.

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Canadian renewable energy companies

Canadian Solar is among the largest solar photovoltaic products companies globally. The company has delivered 55 GW of solar modules to customers in 150 countries. The stock trades at an NTM PE ratio of 63x. The stock has a median target price of $49, which is a premium of almost 22 percent over the current prices.

Emera is another Canada-based company. It has a portfolio of high-quality utilities and has set itself a target of becoming carbon neutral by 2050. Emera trades 4 percent below its average target price.

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Avangrid is an energy services company. It's valued at an NTM PE multiple of 25.3x. It reported revenues of $6.3 billion in 2020, while its net income was $581 million in the year.

While renewable energy stocks have looked weak after rallying towards the beginning of 2021, they have started to gain momentum. Looking at the correction in the renewable energy sector, these stocks could be long-term winners.

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