The recent U.S. presidential election results, including a Republican sweep, have raised questions about the future of renewable energy under President-elect Donald Trump's leadership.
Morgan Stanley's report evaluates the economic impact on renewables under various policy scenarios and its effects on earnings.
The analyst has adjusted its view on the clean tech industry to "In-Line" from "Attractive."
Also Read: Solar, Renewables Stocks Crash After Trump Win: Should You Buy Now At Cheap Valuations?
While long-term demand for renewables is likely stronger than current market perceptions, near-term growth prospects have become less clear due to new uncertainties.
It's important to remember that these new uncertainties add to the already difficult environment facing the clean energy sector, dealing with issues such as permitting and interconnection delays, funding challenges, and intense competition that have hurt profitability.
Uncertainty about the Inflation Reduction Act (IRA), tariffs, and interest rates has significantly impacted clean fuel valuations.
Morgan Stanley writes that clear guidance on the IRA is essential for clean tech valuations to rebound. However, this may take time since it will likely be linked to discussions about the Tax Cuts and Job Act (TCJA), which is set to expire at the end of 2025.
Morgan Stanley recommends investing in stocks with high-quality and durable growth/ margins, with a clear catalyst path and/or strong balance sheet to weather any near-term volatility in growth and/or profitability.
- The analyst maintains an Overweight rating on GE Vernova Inc. (NYSE:GEV), First Solar Inc. (NASDAQ:FSLR), and Bloom Energy Corporation (NYSE:BE).
However, the analyst has downgraded three cleantech stocks from Equal-weight to Underweight, including:
- SolarEdge Technologies, Inc. (NASDAQ:SEDG): The analyst reduced the price target from $23 to $9, citing slower profitability due to decreased European demand and tough competition from cheaper Chinese manufacturers. As a result, the company is not expected to break even on EBITDA until after 2026. At last check Friday, the stock was trading 13.2% lower at $11.13.
- Maxeon Solar Technologies (NASDAQ:MAXN): Morgan Stanley anticipates a slow recovery to profitability due to increasing competition in Europe's utility-scale solar market, which will likely keep pushing prices down. The analyst maintains the price target of $4. Additionally, recent customer losses in the U.S. residential market could make maintaining market share and premium pricing harder. Stock is trading 10.08% lower at $10.08 at last check Friday.
- TPI Composites, Inc. (NASDAQ:TPIC): The analyst notes an uncertainty about how quickly the U.S. wind market will recover, mainly due to challenges in securing financing and recent issues with design and inspections as the industry shifts to larger blade sizes. Morgan Stanley has cut the price target from $4 to $2. Stock is down 8.82% at $2.16 at the last check Friday.
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