Fuel cell, electric vehicle and solar stocks rally as climate bill makes ‘alternative’ energy more ‘in the money’

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Shares of solar, elective vehicle and fuel cell companies all rallied on Monday after the Senate approved what JP Morgan analyst Mark Strouse called “the biggest policy shift in history.” of the United States” to accelerate the transition from fossil fuels.

The bill, titled the Inflation Reduction Act, provides billions of dollars for the generation and use of clean, renewable energy and offers tax rebates for the purchase of new and used electric vehicles. It moves to the House of Representatives, which plans to return on Friday to vote on the bill. Learn more about the Reducing Inflation Act tax refunds and credits.

“We view the Cut Inflation Act as the single greatest policy shift in U.S. history to accelerate the growth of what we view as an already inevitable energy transition to renewables,” wrote Strouse from JP Morgan in a note to clients.

The iShares Global Clean Energy ICLN listed index fund,
+0.62%
advanced 0.9% and the ETF Invesco Solar TAN,
+0.87%
rose 1.2%, to significantly outperform the SPX of the S&P 500 index,
-0.08%
Gain of 0.3%.

Strouse raised its stock price targets and estimates for the alternative energy sector. Although stocks in the sector have already rallied since the bill was announced on July 27, Strouse believes there are “further upsides” as investors have expressed some uncertainty over whether it will pass the Senate.

“While changes are still possible as the bill moves through the House of Representatives, we believe investor expectations for the industry will rise significantly with the passage of a stronger Senate. evenly divided,” Strouse wrote.

Among fuel cell and hydrogen companies, shares of Fuel Cell Energy Inc. FCEL,
+7.83%
jumped 6.5% in midday trading to hit a three-month high, Plug Power Inc. PLUG,
+1.81%
fueled up 2.8% and Ballard Power Systems Inc. BLDP,
+0.93%
erased an earlier gain of up to 5.8% to trade little.

Shares of First Solar Inc. FSLR,
+5.16%
jumped 6.7% to a nine-month high and has jumped 42% since July 27. manufacturing tax credits.

“We see companies with existing domestic manufacturing as the most immediate beneficiaries, while demand is also expected to pick up, likely even more as domestic manufacturing becomes more established, which should drive prices down further and make increasingly cost-effective renewables compared to fossil fuels.”

Among some other solar stocks, Strouse covers, Sunrun Inc. RUN stocks,
+2.71%
increased by 4.6%, Sunnova Energy International Inc. NOVA,
+0.07%
gained 1.7%.

Meanwhile, SunPower Corp.’s SPWR stock,
-0.35%
reversed an earlier 4.6% gain to trade down 1.6%, while SolarEdge Technologies Inc. SEDG,
-3.96%
rose 5.0% before falling back to 0.9%.

Strouse raised his price target on SunPower from $20 to $25, saying he expects the company to benefit from accelerated demand for residential solar power, especially as the company draws 100 % of its income from the United States. However, he reiterated his underweight rating on the stock due primarily to “relative valuation,” saying the premium valuation it is trading at relative to its peers is unwarranted.

He said SolarEdge, which generates around 40% of its revenue from the US market, is also trading at a premium to its peers. He still rates the stock overweight and raised his share price target to $419 from $373.

Elsewhere, Tesla Inc.’s TSLA stock,
+0.52%
charged 4.7% higher, while shares of fellow electric vehicle makers Rivian Automotive Inc. RIVN,
+6.70%
grew 7.8%, Lucid Group Inc. LCID,
+3.46%
climbed 6.8% and Nikola Corp. NKLA,
-3.23%
increased by 1.8%.

Strouse also upgraded TPI Composites Inc. TPIC,
+14.16%
to overweight from neutral, and raised its price target to $27 from $17. Shares of the maker of wind blades for the wind energy market jumped 6.4%, toward their first close above the $20 market since November 2021.

It also downgraded energy and water metering provider Itron Inc. ITRI,
-1.96%
to neutral overweight, saying he did not expect a significant short-term impact on the company’s business from the Inflation Reduction Act. He thinks the other companies he covers are relatively better placed to benefit.

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