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The Clean Energy Landscape in the US and Stocks Poised to Benefit
Affordable Green Electricity
Morgan Stanley sees the potential for the U.S. clean energy landscape to gain favor as green electricity becomes more affordable. Analyst Mayank Maheshwari predicts that technological innovation can help improve efficiency and reduce the cost of green electrons by a third. By 2030, solar and onshore wind are expected to be approximately 35% cheaper than fossil fuels. Maheshwari also highlights the role of government support, supply chain localization, and increased scale in deflating costs for these clean energy companies. Furthermore, he notes that solar, energy storage, and green hydrogen will play a significant role in driving cost deflation in the U.S. and Asia.
Shifting Electricity Landscape
Maheshwari predicts that as electricity consumption grows faster than GDP, the demand for clean power will double by 2030, accounting for nearly half of the world's electricity requirements. As clean power becomes more competitive with fossil fuels, it is expected to overtake fossil-based generation by 2030, transforming the electricity landscape.
Top Picks in the Clean Power Space
Considering this changing landscape, Maheshwari has compiled a list of his top 10 picks in the clean power space. Among them is Sunnova, a solar stock, with a base case price target of $42, implying a potential upside of around 83%. Sunnova, which focuses on residential solar energy, is expected to benefit from the rising demand for rooftop solar and new home energy systems. Similarly, energy infrastructure stock New Fortress is poised for a rally, with a base price target of $50, reflecting a potential upside of about 84%. This company, which converts fuels like coal and fuel oil to natural gas, can reduce energy costs and aid in renewable penetration.
On the other hand, oil giant Exxon Mobil has the smallest anticipated upside of the group, with a forecasted 19% rise in shares to a base price target of $121 per share. Maheshwari acknowledges the company's leading position in carbon capture and clean hydrogen and ammonia. He also points out that the stock currently does not reflect any pricing for its low carbon investments, which could bring in $4 billion of EBITDA by 2030.
It's worth noting that every stock on Maheshwari's list, except Chevron, has an overweight rating from the firm, indicating their favorable outlook and potential for growth. Chevron holds an equal rating.
Conclusion: A Hot Take on the Clean Energy Landscape and New Business Opportunities
The evolving clean energy landscape in the US, as highlighted by Morgan Stanley analyst Mayank Maheshwari, presents a plethora of opportunities for new businesses to thrive. As green electricity becomes more affordable, driven by technological innovation and government support, the demand for clean power is expected to skyrocket. This shift towards clean energy is poised to transform the electricity landscape, with renewable sources projected to overtake fossil-based generation by 2030.
For entrepreneurs looking to capitalize on this growing trend, the renewable energy sector holds immense potential. Residential solar energy provider Sunnova offers a promising opportunity, with a base case price target of $42 per share, indicating a potential upside of about 83%. With the rising demand for rooftop solar and new home energy systems, Sunnova is well-positioned to benefit from this trend.
Energy infrastructure stock New Fortress also presents an exciting prospect for new businesses. By converting fuels like coal and fuel oil to natural gas, New Fortress can help reduce energy costs and facilitate the penetration of renewable sources. Its stock has a base price target of $50, suggesting an upside of about 84%.
While established oil giant Exxon Mobil may have the smallest anticipated upside, it still holds significant potential in the transitioning energy landscape. With a leading position in carbon capture and clean hydrogen and ammonia, Exxon Mobil has the opportunity to tap into low carbon investments that could bring in $4 billion of EBITDA by 2030.
Overall, the clean energy revolution provides a fertile ground for new business ventures. Entrepreneurs who focus on renewable energy solutions, such as residential solar, energy storage, and green hydrogen, stand to gain from the increasing demand for affordable and sustainable power sources. As the clean energy landscape continues to evolve, innovative business ideas and technologies will play a crucial role in shaping a greener and more prosperous future.
Article First Published at: https://www.cnbc.com/2023/07/20/morgan-stanleys-top-clean-power-picks-including-2-stocks-with-80percent-upside.html