US climate bill benefits Bloom Energy, SunPower and Brookfield

The landmark Inflation Reduction Act was signed by US President Joe Biden on 16 August, and investors will be hoping clean energy companies like Bloom Energy, SunPower and Brookfield Renewable Partners will continue to benefit in the longer term.

Clean energy stocks — including solar and fuel cell companies, among others — rallied when the climate bill was passed by the US Senate on 8 August. Initiatives include tax credits for US makers of solar panels like SunPower [SPWR], hydrogen fuel cell specialists such as Bloom Energy [BE], and firms promoting carbon capture technologies like Brookfield Renewable Partners [BEP].

The legislation will funnel $369m into funding renewable energy initiatives to help slow the effects of climate change. Research firm Wood Mackenzie predicts the Inflation Reduction Act will catalyse $1.2trn of private investments by 2035. It already appears to be affecting where investors direct cash. In the month to 12 August, $425.5m was channelled into renewable energy ETS, according to Morningstar Direct, compared with £112.8m in the whole month of July.

In the two weeks to 8 August, the iShares Global Clean Energy ETF [ICLN], First Trust Nasdaq Clean Edge Green Energy Index Fund [QCLN] and the Invesco Solar ETF [TAN] rose by 15.4%, 17.4% and 18.5%, respectively.

Other stocks that have made gains since the bill was passed include solar panel maker First Solar [FSLR], up 15.4% in August to date, and fuel cell expert Plug Power [PLUG], which is up 23.6% over the same period.

Climate bill expands Bloom Energy’s growth prospects

Hydrogen fuel cell specialist Bloom Energy saw its share price close 4.3% higher than the previous day on 8 August at $25.15, and continued to rally over the days that followed to reach $30.36 on 12 August — its highest level since November 2021.

Dimitry Dayen, an analyst at ClearBridge Investments, recently highlighted Bloom Energy’s growth prospects thanks to the bill’s subsidies for green hydrogen, which could help the firm achieve bumper profits.

However, Bloom Energy’s share price has been under pressure lately. On 16 August, the company announced plans to dilute its stock by issuing 13 million Class A common shares to raise capital. On the day, Bloom shares traded 11.7% lower than the previous close.

In general, the Bloom Energy share price has fluctuated through 2022, though year-to-date to 22 August, it has increased by 12.6%.

The company has operated at a net a loss for the past five years, but its Q2 results, released on 9 August, showed positive signs. Revenues of $243.2m were up 6.4% year-over-year from $228.5m in 2021. 

Despite this, the forecast for Bloom Energy stock remains muted. At CNN, 16 analysts have a median target of $30.00 for BE stock, an upside of 21.4% from its close on 22 August (but below its 52-week high of $37), while it’s currently rated a ‘hold’.

SunPower sees customer and revenue growth in Q2

Solar panel manufacturer SunPower is increasingly focused on the residential market, an area likely to grow thanks to the Inflation Reduction Act.

SunPower recently teamed up with IKEA to sell its home energy products in stores in the US, while last year it acquired residential solar provider Blue Raven.

After a shaky first half of 2022, the SunPower share price has gained 44.7% in the past month, suggesting it is benefitting from tailwinds created by the climate bill. Year-to-date, the stock is up 17.9% as of 22 August.

SunPower’s Q2 results, announced in early August, also suggest growth on the cards. The company added 19,700 customers during the period, representing a 50% rise year-over-year. Its revenues also jumped 63% year-over-year to $5.2m. SunPower posted earnings per share of $0.03, slightly exceeding the $0.02 per share forecast by FactSet analysts.

However, as with Bloom Energy, analyst sentiment is still mixed. At CNN, 17 analysts giving 12-month price forecasts for SunPower gave a target of $22.00, a projected decrease of 10.6% from its close on 22 August, suggesting some think it’s overpriced. A consensus of 20 analysts recommend to ‘hold’ the stock.

Brookfield invests in carbon capture

Canadian-based company Brookfield deals in renewable energy, historically with a focus on hydroelectric power. However, the company is expanding into solar and wind power.

It’s also invested in carbon capture assets — another area set to benefit from tax breaks offered by the bill, with credits of up to $85 per tonne for burying carbon dioxide and $180 per tonne for extracting the greenhouse gas from air.

As of 22 August, Brookfield stock was up 10% year-to-date, though the stock has slipped 4.2% since 8 August.

A consensus of 17 analysts polled by MarketBeat rate it a ‘moderate buy’, while the target price of $43.36 would be an upside of 12.2% from 22 August close.