You’re here (NASDAQ: TSLA) is getting a lot of attention in the renewable energy industry with its flashy products, high-profile CEO, and sky-high stock price. But the company has never reported consistent earnings, and it’s easy to argue that Tesla is overvalued whether you look at its valuation relative to sales, earnings, or book value.
As investors debate the future of Tesla shares, we believe there are better opportunities in renewable energy. Sun Power (NASDAQ: SPWR), Enphase Energy (NASDAQ:ENPH), and Brookfield Renewable Partners (NYSE:BEP) (NYSE: BEPC) are all better renewable energy stocks than Tesla. Three of our contributors have come together to tell you why.
Solar stock on the rise
Travis Hoium (SunPower): Without a doubt, Tesla has been the best renewable energy stock in the world since its IPO. But with this stock market performance comes higher expectations. Tesla’s price-to-earnings ratio is laughable because it makes so little profit, and its price-to-sales ratio of nearly 17 is usually reserved for software stocks, not manufacturing stocks. That’s a big reason why I think SunPower is a better buy than Tesla.
What I love about SunPower’s current position in the solar power market is that it provides valuable solutions to customers and installers. For customers, it provides a high-quality brand and online quote interface that lets you see, in less than a minute, what it costs to go solar. For installers, it provides leads through its quotes interface and offers high-efficiency solar panels (through its spin-off Maxeon Solar), installation hardware, monitoring software, financing, and now storage controls. of energy which can constitute a new source of income in the long term. These are tools that would be difficult for any individual installer to build, so leveraging a large-scale tech company and a well-known brand can be a valuable service. It effectively creates a two-sided market in which it can sit.
Given this strategy, what I think makes SunPower a better stock than Tesla is the fact that it is moving towards an asset-light model in a residential and commercial market with huge upside potential. growth. It’s no longer a big solar maker and can focus on software and services, which should generate better long-term margins.
If you’re looking for an edge, SunPower is the better stock of the two, though Tesla remains the bigger name in renewables.
A sector with a bright future
Howard Smith (Enphase Energy): Owners of You’re here (NASDAQ: TSLA) stock are happy, the company has a cult following and a charismatic leader. Both of these things have contributed to the stunning growth in the stock price, as well as the fact that the transition to renewable energy is here to stay.
But for new investors looking to capitalize on equity ownership in the sector, Enphase Energy has measurable fundamentals as a “picks and shovels” provider of solar power growth.
Enphase provides microinverters for solar panels, as well as solar system tracking and storage technologies. Since acquiring the microinverter business of Sun Power (NASDAQ: SPWR) in 2018, Enphase posted sales and profitability that captured the attention of investors. Revenue growth has outpaced Tesla’s over the past three years.
And the future looks bright for the company. Solar power generation is expected to grow by an average of 15% per year over the next 10 years, according to the International Energy Agency (IEA).
In addition to its already thriving microinverter business, Enphase began shipping its Encharge energy storage systems in June. As the growth of solar power continues, so will Enphase.
Tesla investors see a lot of potential. Much of this, however, can be factored into the price. For new investors looking to cash in on the solar power boom, Enphase Energy is a leader with a growth streak.
The best company in renewable energies
Jason Hall (Brookfield Renewable): If there’s one aspect of his business that Tesla failed to turn into something amazing, it’s solar business. After acquiring SolarCity a few years ago, Tesla has shrunk its solar installation segment and its solar panel manufacturing business falls far short of the promise Elon Musk made with the solar roof. On the one hand, that certainly lowers the bar for Tesla, doesn’t it?
May be. But that’s not the problem: the problem is that Tesla does not have been a good solar company. You know what at been an amazing solar company? Brookfield Renewable Power. Over the past few years, the company, which makes a living by developing and operating large-scale renewable energy generation facilities, has generated marvelous returns for investors. Since making solar a top priority by taking a large stake in Terraform Power in early 2017 (which it has since fully acquired), Brookfield Renewable has generated nearly triple the returns of the SPDR S&P 500 ETF Trust (NYSEMKT: SPY):
Yeah, I know. Tesla has made more than 700% gains over the same period. The catch is that much of these gains are the product of an ever-increasing valuation multiple, not meaningful gains in per-share yields. Brookfield’s stock price rose because it experienced strong growth and consistently paid a higher dividend to investors.
I anticipate that going forward, Brookfield Renewable will continue to grow cash flow and increase the dividend each year, creating significant value for investors. Tesla’s business results will also likely improve from here, but the current valuation sets a very high bar for being the best investment.
Discreet profile but great potential
SunPower, Enphase and Brookfield Renewable Partners may not fit Tesla’s profile, but they are still great companies with great growth potential. That’s why we love them so much and given Tesla’s recent rise to prominence, they may be safer options for investors if Tesla missteps in the next few years.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.