Boom in the renewable energy sector: Jefferies analyst predicts significant profit opportunities

The expansion of renewable energies, particularly wind and solar power plants, is gaining momentum despite some controversies. This trend is supported by both societal and political will. Installations are particularly increasing at the supply level, although current industry inventory surpluses pose challenges. Congress is already working on regulatory adjustments, and more private companies, especially data centers, are switching to renewable energies. These developments suggest a strong sector expansion, offering investors opportunities for good investments. This view is also shared by Jefferies analyst Julien Dumoulin-Smith, who sees significant profit potential in two stocks within the renewable energy sector. Both stocks have positive outlooks from analysts, making them particularly interesting. Sunrun: Market Leader in Residential Solar Power Systems Sunrun is a leading provider in the U.S. market for residential solar installations. The company offers solutions without upfront costs and handles the design, installation, and operation of solar systems. Sunrun differentiates itself by providing capabilities to feed energy back into the public grid or integrate smart control systems. The company experienced a boost when competitor SunPower declared bankruptcy, allowing Sunrun to gain market share and sales personnel. Additionally, the prospect of falling interest rates is expected to facilitate customer financing and positively impact Sunrun’s business. Despite a revenue decline in the second quarter of 2024 to $523.9 million, the company exceeded forecasts. The non-GAAP EPS was 55 cents per share, marking a significant increase. Analyst Dumoulin-Smith praises Sunrun's strong market position and sees further growth opportunities through political measures such as the Inflation Reduction Act. Fluence Energy: Specialist in Energy Storage Fluence Energy offers a comprehensive ecosystem to support the energy transition with modular and scalable storage systems, comprehensive service packages, and an AI-powered software platform for optimization. These systems can be applied flexibly and expansively, whether as small modules or large-scale grid solutions. In the third quarter of the 2024 fiscal year, Fluence achieved revenues of $483.3 million, also better than expected. Notably, the company received record orders amounting to $1.3 billion and has a backlog of $4.5 billion. Dumoulin-Smith believes Fluence is well-positioned due to this strong order situation and expects substantial revenue acceleration, genuine profitability, and free cash flow by 2025. These prospects underpin his buy recommendation for the stock. Overall, the renewable energy sector currently offers attractive investment opportunities, supported by positive analyst ratings and favorable market prospects.