2 Beaten-Down Alternative Energy Stocks To Rebound In 2019
Zacks Investment Research | Dec 20, 2018 08:42PM ET
U.S. Alternative Energy stocks have been going downhill since the beginning of this year, thanks to Trump’s belligerent stance on renewable energy resources. The Zacks Alternative Energy industry has declined 2.6% year to date.
We have briefly discussed below the factors that resulted in disappointing performance of the industry.
Import Tariff & Other Growth Inhibitors
Annulment of the Clean Power Plan in 2017 came as a big shock for the alternative energy industry. On top of that, the imposition of an import tariff on steel and aluminum in March 2018 is also expected to be a growth inhibitor for the industry, per analysts. This is because steel and aluminum are widely used as raw materials to construct critical wind turbines, storage and hydroelectric components.
GTM Research, MAKE Consulting and Wood Mackenzie collectively calculate the resulting price increase in commodities, due to this tariff imposition, to potentially result in 3-5% increase in levelized cost of energy for U.S. renewable power plants. This, in turn, may lead to slightly lowered forecasts for project deployments.
No wonder, 2018 has not been very optimistic one alternative energy stocks, which are witnessing policy uncertainties under Trump administration.
China’s Clean Energy Dominance
According to Institute for Energy Economics and Financial Analysis’ (IEEFA) report, China was a dominant force in the building and financing of clean energy technology globally in 2017. To this end, Tim Buckley, IEEFA’s director of energy finance studies, mentioned that “the clean energy market is growing at a rapid pace and China is setting itself up as a global technology leader while the U.S. government looks the other way.”
It seems that China kept up with this trend in 2018 as well. Per Wood Mackenzie Power & Renewables’ Global Wind Power Asset Ownership 2018 report, Chinese operators remain leaders in the global wind asset market. China Energy Investment Corporation is now the world’s largest developer of wind energy, post the acquisition of China Guodian. The nation’s dominance in the alternative energy space has been denting U.S. companies’ revenue generation capacity, partially.
Industry’s Prospects in 2019
Certainly, stocks in the U.S alternative energy space have taken a beating in 2018, owing to the factors mentioned above. However, there’s no denying the fact that renewables are the future of energy. Impressively, recent technological advancements, leading to rapid expansion of newfound renewables like offshore wind technologies, should keep U.S. alternative energy stocks afloat in the coming days.
In this backdrop, we have highlighted two stocks from the alternative energy industry that have lost more than 20% year to date but still look well poised for the upcoming year based on their strong fundamentals and a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Zacks Investment Research
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