Citi Analyst Discusses Clean Energy Stock Performance

According to Citi analyst Drew Pettit, investors should consider reevaluating their investments in clean energy stocks. Despite a significant rally in the sector driven by social and political factors, as well as favorable market conditions, many clean energy stocks have experienced a decline since late 2021. Pettit attributes this decline to tightening liquidity. The iShares Global Clean Energy ETF (ICLN) has seen a 30% decrease over the past two years.

Opportunities in the Clean Energy Sector

However, Pettit believes that there are still opportunities for investors in the clean energy sector. He suggests focusing on stocks that offer near- to medium-term potential. Pettit notes that investors tend to have low patience when waiting for a company to prove its business model. Additionally, there is an emphasis on higher performance and fundamental dispersion. Pettit states, “The profitable side of Clean Energy is alive and well with many stock selection opportunities.”

Stock Selection Strategies

Pettit advises investors to focus on stocks with premium growth expectations that are reasonably priced. He recommends looking at stocks within developed markets that have growth rates above sector averages, based on factors such as price/earnings-to-growth or enterprise value-to-EBITDA ratios.

Stocks to Consider

Pettit has identified 10 stocks that meet his criteria for potential investment:

• SolarEdge
• Enphase
• Cummins
• (Additional stocks not mentioned in the original content)

Stocks to Avoid

Pettit cautions against investing in companies with high cash burn and negative free cash flow, such as Rivian, SunPower, and Sunnova. These stocks are considered to be at higher risk.

Note: This article includes contributions from HaberTusba’s Michael Bloom.