Let’s take a look at clean energy stocks First Solar and Enphase Energy, as well as the alternative energy stock Plug Power, that are slated for an upswing thanks to a proposed Senate energy and climate-spending package worth $369 billion.
Last week, solar stocks and green energy stocks saw euphoric gains after U.S. Democratic Senator Joe Manchin and Senate Democratic leader Chuck Schumer struck a deal and proposed the aforementioned package.
The newly proposed Inflation Reduction Act (IRA) will raise $739 billion, out of which $369 billion will be exclusively allocated to climate and energy programs. The bill is also aimed at bringing down healthcare costs as well as reducing inflation and the federal deficit through a 15% corporate minimum tax.
With an aim to make the U.S. more energy independent and boost domestic production of green energy, the climate package comprises subsidies and tax incentives that will direct billions of dollars to wind, solar, and battery developments while also supporting oil and gas and coal production.
The bill will enable investments in technologies needed for cleaner production and use of fuel types, including hydrogen, nuclear, renewables, and fossil fuels, as well as provide tax credits for buying electric and hydrogen vehicles.
Meanwhile, higher costs and valuations have hammered clean energy stocks in the past couple of months, pulling them from their peaks seen at the beginning of FY2021.
With the catalyzing climate bill, solar and green energy stocks will be one of the biggest beneficiaries, as it could significantly uplift their profits going forward.
First Solar (FSLR)
Based in the U.S., First Solar focuses on developing, engineering, constructing, and operating grid-connected large-scale PV power plants. It manufactures solar panels and PV modules and is known for its advanced thin-film modules for its solar panels, which provide a high-performance, lower-carbon alternative to conventional crystalline silicon PV panels.
First Solar shares leaped a whopping 30% in less than a week following the dual good news of upbeat second-quarter results as well as the proposed climate bill acting as the immediate catalyst.
The company reported earnings of $0.52 per share, which came in more than tenfold higher than the analyst estimates of $0.04. The earnings gain was driven by higher module sales volume; a gain on the sale of the Japan project development platform; record bookings and backlog,
Furthermore, the company also increased its FY2022 revenue outlook from the earlier $2.4 billion to $2.6 billion, to $2.55 billion-$2.8 billion, much higher than the consensus expectations of $2.43 billion.
Notably, the company posted a record backlog of more than 44 GWs, ensuring future deliveries till 2026. On top of that, new bookings worth 10.4 GWs took the total bookings to 27.1 GWs year-to-date.
During the earnings call last week, CEO Mark Widmar stated that First Solar will potentially expand its manufacturing capacity in the U.S. if the proposed bill gets passed and becomes a law.
What’s even more encouraging is that First Solar stock saw multiple upgrades by well-known street analysts as well as upward revisions in price targets.
Oppenheimer analyst Colin Rusch upgraded First Solar to Buy from Hold with a price target of $116 (16.6% upside potential).
Rusch estimates that FSLR will achieve earnings accretion of between $8 and $10 annually as a result of the tax credits from domestic production with the implementation of the new bill.
Meanwhile, the rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate …….