Börse Frankfurt-News: New attempt for renewables? (foreign stocks) | news
FRANKFURT (DEUTSCHE-BOERSE AG) – Many stocks from the renewable energy sector lost feathers this year. They are also affected by numerous market-burdening factors. The industry is also receiving massive support in the USA.
October 13, 2022. FRANKFURT (Frankfurt Stock Exchange). The markets remain badly hit, even future-oriented sectors are currently not up and running. The global renewable energy index MSCI Global Alternative Energy fell by 13 percent from the beginning of the year to the end of September. This puts it in a better position than the market-wide MSCI World, which is down 25 percent. In view of the prospects for the industry, however, the development is still surprising. After all, the industry index contains a focus on solar companies such as Enphase Energy, Solaredge and First Solar as well as wind energy companies such as Vestas Wind and Orsted.
Billion dollar US climate package
Some of the companies in the industry are even reporting greater losses, as Marc Richter from Baader Bank notes. Three factors are currently weighing on the sector: There is the sharp rise in interest rates, which is driving up financing costs. “Additionally, venture capitalists have withdrawn.” In addition, there are again bonds with attractive yields, three-year US government bonds with over 4 percent. “Of course, investors are wondering why they should bet on such a cracked sector.” Richter is assuming the positives, but that the companies have adapted to the new situation. The huge support programs from the state, for example from the US government, also speak in favor of the industry.
As part of the Inflation Reduction Act passed by the US Senate in August, 375 billion US dollars are to flow into climate-friendly measures over the next ten years, such as the promotion of solar cells, wind turbines and electric cars. According to the former vice president and committed environmental campaigner, Al Gore, the program marks a historic turning point. “It represents the largest single investment in climate solutions and environmental justice in US history,” he tweeted.
First Solar: Price doubling in a short time
The direct beneficiary is the US solar company First Solar, as Walter Vorhauser from Oddo BHF explains. “The program should massively boost demand for the company’s thin-film solar modules.” The share (US3364331070) still costs around 70 euros before the program was announced, currently it is almost twice as much at 130 euros. Equity analysts are expecting further price gains: For example, Goldman Sachs upgraded First Solar from “Sell” to “Buy” and raised its price target from $60 to $172 (currently $127).
Vestas: Headwinds for wind turbine builders
The Danish wind turbine manufacturer Vestas Wind is struggling a lot more. The price of the share (DK0061539921) has more than halved since the high at the beginning of 2021 at over 40 euros to currently 18.20 euros. “Vestas increases the general market weakness, supply problems and high raw material costs,” reports Vorhauser.
Vestas posted a year-on-year revenue loss for the second quarter.
Vulcan wants to mine lithium in Germany
Shares in Vulcan Energy (AU0000066086) have also fallen this year, albeit not as much. The Australian lithium producer, which also has a branch in Germany, is currently trading at EUR 4.50. At the beginning of the year it was 6.80 euros. But that could soon look different. “Vulcan will mine lithium in the Upper Rhine Graben, where there are high deposits,” Richter reported. The lithium is to be extracted from thermal water – i.e. without major interventions in nature and with a practically climate-neutral process. Large-scale production is scheduled to start in 2024. “Vulcan Energy is still not making any money, but supply contracts have already been agreed with the car company Stellantis for the purchase of lithium for one million electric cars a year.”
“Fuelcell not for the faint of heart”
Richter Fuelcell Energy (US35952H6018), the US fuel cell manufacturer, is also worth a look. “But the share is not for the faint of heart, the price fluctuates strongly.” Recently, the company has repeatedly disappointed and has fallen short of expectations with its figures. “However, hydrogen has a future and is particularly interesting for heavy transport and shipping. This could also pay off for Fuelcell in the long term.” The share currently costs EUR 3.05 on the Frankfurt Stock Exchange, after EUR 5 at the beginning of the year and over EUR 20 at the beginning of 2021.
“Industry should recover”
Even if, in Vorhauser’s opinion, it should remain difficult in the short term, the medium and excessive prospects for the industry are good. “Renewable energies are the future,” explains the dealer. This is also becoming clear here in Germany. “Once the rate hikes are over and digested, the industry should recover on the stock market as well.”
In the long term, the industry development is not bad anyway: over a ten-year period, the MSCI Global Alternative Energy Index has a return of 12.5 percent per year, while the MSCI World “only” has 8.7 percent.
by: Anna-Maria Börse, October 13, 2022, © Deutsche Börse AG
(Deutsche Börse AG is solely responsible for the content of the column. The articles are not an invitation to buy or sell securities or other assets.)