Which renewable energy stocks to buy has been a wild ride for investors over the last few years. Back in 2021, these stocks surged to irrational valuations. This was due in part to exuberant investing in other sectors like electric vehicles. Since then, renewable energy stocks have largely been beaten up. Why? The stock valuations got ahead of themselves and growth was slower than first imagined. We’ve also seen a clear rotation to growth sectors like semiconductors and AI.
But now, the markets are coming back around on renewable energy stocks. The pendulum often swings too far each way and these stocks are oversold. With global corporations still aiming to be carbon-free and a concerted effort to move away from fossil fuels, the time has come for renewable energy sources to emerge. Here are three renewable energy stocks to buy in May 2024.
Constellation Energy (CEG)
Constellation Energy (NASDAQ:CEG) is the largest generator of carbon-free energy in the U.S. Eight of the thirteen analysts following CEG in April rated it a “Buy” or “Strong Buy.” This shows that Wall Street is bullish on CEG. The one-year price target range for CEG is $116 to $242. As such, the high end of this range indicates about a 15% upside from its current price.
This renewable energy company has a growing portfolio of infrastructure and projects. Constellation primarily works with hydrogen power but has significant investments in nuclear and wind energy. Constellation’s nuclear portfolio powers everything from data centers to 24/7 flexible energy grids that provide backup power. With two million customers and providing services for 75% of Fortune 100 companies, Constellation is a cornerstone of the renewable energy industry.
Shares of CEG are trading at about 2.9x sales and 27.9x forward earnings. It’s a cheap valuation but slightly elevated compared to its peers with an industry-average ratio of 1.7x sales. However, this is easily made up by the fact that it has also grown its net income at a five-year CAGR of 34%. This vastly outperforms its peers.
JinkoSolar (JKS)
JinkoSolar (NYSE:JKS) is a company based in Shanghai, China that specializes in solar modules for both commercial and residential use. It is one of the largest solar module manufacturers in the world. It was a rough quarter for JKS so analysts are holding their recommendations on the stock. The average analyst price target of just over $27 shows there is about 10% upside from today’s price.
This company is going through a rough patch following its recent quarterly earnings report. Solar has always been an industry that is rate-sensitive and the high interest rates are eating into Jinko’s margins. This has led to revenue and profits taking a hit. As we are approaching the end of the rate-hiking cycle, a much more favorable environment seems to be approaching.
Despite the earnings report, Jinko has managed to grow its sales at a CAGR of 33% over the past 10 years. This is a massive growth rate which we should expect to only continue. Incredibly, shares of JKS are trading at just 0.09x sales and 9.75x forward earnings. If there was ever a time to go long on Jinko, the valuation suggests now would be the time!
Xcel Energy (XEL)
Xcel Energy (NASDAQ:XEL) is better known as a regulated utilities company but it is establishing itself as a renewable energy provider. This stock is currently trading below the low mark of the one-year analyst price target range of $57 to $72. The average price target of $62.74 represents nearly 15% upside which is significant for a utilities stock.
Xcel provides natural gas and electricity services and in 2018, it announced that by 2050 it would serve 100% carbon-free power to its more than five million customers. How is Xcel going to manage this? It is investing heavily in renewable energy infrastructure such as hydroelectric power, nuclear plants, solar panels and wind turbines.
Shares trade at just 2.2x sales and 15.6x forward earnings indicating that the stock may be undervalued. On top of that, Xcel has continued to grow its net income at a CAGR of 7% for the last 10 years. Given that Xcel has also increased its dividend for more than 20 straight years and currently pays a yield of 3.92%, this stock should be high on any investor’s list of renewable energy stocks to buy.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.