3 Clean Energy Stocks Poised to Skyrocket in the Next Market Recovery

Companies investing in decarbonization translate into healthy growth and cash flow

Governments around the world and the business sector are focused on achieving the net zero target in the coming decades. This means significant investment in the clean energy sector. While the industry’s strong momentum is likely to continue for several decades, that doesn’t mean clean energy stocks will continue to grow in one direction.

Phases of correction and consolidation should therefore be expected due to short-term factors inhibiting growth. Long-term investors may benefit from a good opportunity to buy high-quality clean energy stocks. Several clean energy stocks have corrected over the past few quarters due to unfavorable macroeconomic conditions, inflation and geopolitical factors. Now is a good opportunity to accumulate.

Returning to the industry’s potential, a recent report found that clean energy spending “remains concentrated in a few countries and sectors.” As more countries participate in the program, there is ample room for solid economic growth beyond the decade.

So let’s talk about three stock bets that can bring huge benefits.

Lithium Americas (LAC)

smartphone with the logo of the Canadian company Lithium Americas Corp on the screen

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Among emerging lithium miners, Lithium Americas (NYSE:GUMILAK) is significantly undervalued and vulnerable to a large reversal upside. Even after many positive developments in the business, LAC shares are down 30% year-over-year (since the beginning of the year). This seems like the perfect time to accumulate. From the current level of $4.50, I would expect a return of at least 5x over the next three years.

In particular, lithium supply gaps are likely to occur in the coming years, perhaps in 2025. The supply gap is likely to be severe beyond the next decade. Investors can therefore take advantage of the current weakness in the lithium price.

The Thacker Pass project, specific to Lithium Americas, is likely to be a game-changer. The assets have an after-tax net present value of $5.7 billion and a mine life of 40 years. Moreover, once production begins in both phases, the asset’s annual EBITDA is estimated at $2 billion.

In the recent past, the company received a loan worth $2.26 billion from the United States Department of Energy. Moreover, Lithium Americas raised $275 million in an underwritten public offering. With the financing gap related to the construction of the Thacker Pass project closed, LAC’s stock is poised for a big rally.

First Solar Energy (FSLR)

The first Solar logo on a smartphone in front of a computer screen with graphs.  FSLR stocks

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First Solar (NASDAQ:FSLR) stocks have increased slightly by 10% over the last 12 months. I expect a large upside in FSLR stock prices with an attractive forward price-to-earnings ratio of 14.3. Fist Solar recently released its first-quarter 2024 numbers, and the company exceeded earnings and earnings estimates. This strengthens the case for strong growth from current levels.

Encouragingly, First Solar ended the first quarter of 2024 with a total order backlog of 78.3 GW. In addition, the company has the potential to reserve capacity of 72.8 GW. Thus, clear revenue visibility for the coming years becomes apparent.

This year, First Solar expects sales volume to range from 15.6 GW to 16.3 GW. With new facilities coming online in 2024 and 2025, it is likely that sales volumes will grow at a healthy rate. This will support revenue growth and potential margin expansion. I must add that unfavorable macroeconomic conditions have influenced the mood in the industry. Given potential interest rate cuts in the coming quarters, economic growth is likely to accelerate.

Linde (LIN)

Logo of Linde AG (LIN) in Hannover, Germany - The Linde Group is an international chemical company

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The hydrogen economy is likely to expand in the coming years due to planned large investments. According to the International Energy Agency, the production of low-emission hydrogen may reach 38 million tons in 2030. Linde (NASDAQ:LIN) are some of the best hydrogen stocks to consider for long-term value creation.

Importantly, LIN stock has been on a gradual upward trend over the last six months. However, valuations look attractive as the dividend yield for the company’s shares is 1.29%. Moreover, with a significant commitment to hydrogen investment, sustained growth can be achieved. In 2023, Linde announced a targeted clean energy investment of $7-9 billion over the next two to three years.

Additionally, the company has deep expertise in the industry. It operates 200 hydrogen refueling stations and 80 hydrogen electrolysis installations around the world. Linde is also the operator of the world’s first high-purity hydrogen storage cavern. This expertise allows Linde to scale its operations as demand for clean hydrogen grows.

As of the date of publication, Faisal Humayun did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to Publishing guidelines.

Faisal Humayun is a Senior Research Analyst with 12 years of industry experience in credit research, equity research and financial modeling. Faisal has written over 1,500 stock market articles, with a focus on the technology, energy and commodities sectors.