Energy stocks have been many investors’ favorites for a long time. The energy sector incorporates various sub-industries and companies within them such as natural gas, coal, oil and alternative clean energy.
However, as our interconnected global society grows more conscious and educated about the environmental damage of climate change, the consumer demand for clean energy has skyrocketed. To meet this rising demand, governments started to support large clean energy subsidy projects like the Inflation Reduction Act (IRA) passed by the Biden Administration.
Yet it has been almost two years since the IRA passed and a lot of the renewable energy companies are running out of the initial subsidies that were granted them. To make things worse, the Federal Reserve has been aggressively increasing the interest rate, which discourages investments going into large renewable energy projects.
Thus, at this time, investors should be skeptical of clean energy stocks and start selling their positions if they own any. Below are three clean energy stocks to sell in July before they crash and burn.
Sunnova Energy (NOVA)
Sunnova Energy (NYSE:NOVA) is a Texas-based solar energy company that specializes in residential solar panels. The company has coverage in all 50 states, and it not only offers panel electricity generation but its service also includes providing customers the option to use its solar energy to charge electric vehicles at home. The company has accumulated over 430,000 customers across the nation.
Sunnova Energy had a great year in 2022 following a Covid-19 pandemic recovery and accomplished triple-digit growth. However, since then the Texan renewable energy company has been on a decline. Last year, Sunnova Energy had a -158.57% net income growth compared to the previous year due to an extended period of negative cash flow as well as an overall decrease in the demand for solar energy. Considering the current macroeconomic conditions as well as its poor financials, Sunnova Energy indicates no signs of recovering any time soon.
AES (AES)
AES (NYSE:AES) is a power generation and utility company with power subsidiaries in Ohio and Indiana. The American energy giant has far greater international reach with electric power generation and distribution in 15 countries. It is one of the largest power companies in the world and is on the Fortune 500 list.
In 2023, AES announced it successfully completed 3.5 gigawatts (GW) worth of renewable energy projects, which doubled the company’s capacity from the previous year. Out of the total, 1.6 GW were solar, 1.3 GW were wind and 0.6 GW were energy storage. While this might sound like good news for investors, in reality, the completion of the project has not helped financially. In fact, the company’s latest financials reveal AES had a 5% decrease in revenue compared to the previous quarter while its debt increased by 20%. As of this writing, the stock has lost 10% of its value year-to-date. These financials do not look promising at all, and investors should start selling AES positions soon.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) is a globally recognized solar power company. It is famously known for its microintervert-based solar and battery systems technology as it is the single largest supplier in the world. From less than $10 per share less than five years ago to reaching nearly $350 per share in 2022, Enphase Energy has achieved tremendous growth over the past few years. Especially in 2022 when the Biden Administration passed the IRA, which focused on increasing government subsidies and tax benefits to encourage more renewable energy development like solar photovoltaic projects in the country, the excitement grew exponentially.
Unfortunately, a lot of these tailwinds dissipated when the Fed began to raise interest rates aggressively, subsidies began to run out and the macroeconomic conditions put our nation in economic uncertainty. Enphase Energy stock has a forward price-to-earnings ratio of over 40 and analysts are predicting a near 35% decline in the company’s revenue. With too much uncertainty and at a high price tag, now is a good time to sell Enphase Energy.
On the date of publication, Andy Kim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
