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Could NextEra Energy stock surge despite current turbulence?

NextEra Energy [NEE] stock has plunged more than 20% already this year, following a drop in revenue and an upcoming change of CEO, but most analysts remain optimistic.

One of the largest electric power generators in the US, NextEra supplies Florida with clean electricity through its Florida Power & Light Company [FPL] business. But with depleted energy resources driving up demand for natural gas and oil, clean energy stocks have taken a hit.

Last year the firm boosted its backlog with approximately 7,200 net megawatts of new renewables and battery storage projects – but a mixed 2021 earnings report showed full-year operating revenue declined 5.3% to $17.1bn, reports tipranks.com. Added to that, a change of CEO – with John Ketchum taking over as NextEra Energy’s new president and CEO from 1 March – has also rattled the stock, though current chairman and CEO Jim Robo will step in as executive chairman until then.

So, does NextEra Energy stock represent an opportunity to buy into the dip, or should investors hold out for some tangible tailwinds, which might help propel the stock during 2022?

What’s happening with NextEra Energy stock?

After years of steady gains since going public in 2014, NextEra Energy stock continued to climb through 2021 to reach an all-time high of $93.73 on 31 December. However, this year has been a different story, with the share price sliding 20.90% year to date, closing down at $72.50 on Friday 28 January. Much of this drop was seen last week, with $10.10 – 12.22% – wiped off the share price in just five days.

Should current turbulence signal caution against NextEra Energy stock?

A slide in annual revenue, potential boardroom uncertainty and an imminent rise in US interest rates could make some clean energy investors cagey. And beyond last year’s COP26 climate conference, has there been enough action in the form of government renewable energy initiatives to boost investor confidence?

The Biden administration has targeted carbon-free power for the US by 2035, but that will require trillions in investment, while reaching this goal globally will need a seismic $22.5tn investment in renewable capacity, report Kari Huus and Frank Gibney in Climate & Capital Media.

According to the Guardian, The International Energy Agency (IEA)’s December 2021 report concluded that renewables will account for about 95% of growth in global power-generation capacity up to the end of 2026. The IEA also declared that 2021 was a record year for renewable energy, so there are certainly underlying reasons to expect tangible market growth in 2022 and beyond, and that in itself offers encouragement for NextEra stock investors.

$22.5trillion

Total investment required for global carbon-free energy by 2035

 

NextEra raises guidance on investment opportunities

Outgoing chair and CEO Jim Robo was bullish in last week’s Q4 earnings release, saying: “Based on the continued strength of the investment opportunities at both Florida Power & Light and NextEra Energy Resources, we are announcing an increase to our adjusted earnings per share (EPS) expectations”.

NextEra Energy anticipates adjusted EPS in the range of $2.75 to $2.85, up from previous expectations of $2.55 to $2.75. Beyond this year, for 2023 to 2025 the company assumes growth of about 6% to 8% per year over the upgraded 2022 figure.

And there is no denying Robo’s ambition. NextEra Energy has “a long-term vision to be the largest, cleanest, most profitable clean energy provider in the world … to really lead the decarbonisation of the entire US economy,” he told Climate & Capital Media.

Robo’s confidence has foundations in NextEra’s established status as a major player in the field. FPL’s management team began exploring safer alternatives to coal back in the 1990s and by 2009, they were the biggest provider of wind and solar power in the US. Huus and Gibney share Robo’s outlook, saying “if you let NextEra slip off the radar, think again. There is no other company outside of China that produces as much power through solar and wind.” It certainly bodes well for NextEra Energy stock and its longer-term prospects.

What lies ahead for NextEra Energy stock?

Two recent broker updates on NextEra stock show Morgan Stanley maintaining its Hold rating with a price target of $90.00 on 21 January, and RBC Capital sticking with its Buy rating and a $99.00 price target, on 25 January.

Overall, CNBC analysts following the stock have six Strong Buy, 10 Buy, and six Hold ratings, with a consensus price target at $92.85, representing a potential upside of 28.07% on last week’s $72.50 close. CNBC’s Mad Money host, Jim Cramer, is certainly sweet on the company’s potential, saying: “NextEra is the fastest growing utility. I think it’s terrific, and I actually would be a buyer here tomorrow morning.”

NextEra Energy has been through relatively troubled times recently. But the company’s firmly established position in the green energy market, ambitious growth targets and raised guidance, could yet reward those keeping the faith with a stock resurgence as we head deeper into 2022.

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