Goldman Sachs has highlighted several European renewable energy stocks that it believes the market has overlooked, anticipating a rebound in the sector after a period of declining returns. The bank stated that the significant increase in the revenue of renewable energy storage projects has been disregarded by the market. Goldman Sachs views the growth in renewable energy as highly compelling, citing factors such as the European energy crisis, reduced costs for wind and solar energy, and the European Union’s commitment to addressing climate change.
The bank maintains a buy rating on various renewable energy stocks, including RWE, Orsted, EDP Renewables, ENEL, and SSE. Specifically, Goldman Sachs highlights RWE’s upside potential, stating that the German company is well-positioned to capture the expanding addressable market in the US, Germany, and the rest of Europe. The bank’s price target for RWE implies more than a 50% increase from its current share price levels.
Goldman Sachs also views Danish company Orsted favorably, noting that a recent meeting with investors indicates a positive outlook on profits, leverage, and returns. The bank identifies Scottish firm SSE as another preferred stock, attributing its investment in new projects and the anticipated increase in power prices and thermal generation profits as drivers for unlocking further value.
Two of Goldman Sachs’ stock picks, Spanish firm EDP Renewables and Italian firm Enel, are on the bank’s conviction list of most favored stocks. EDP Renewables is expected to achieve a compound annual growth rate of 13% between 2022 and 2027. Goldman Sachs believes the stock is currently undervalued in terms of future growth potential. Similarly, Enel is favored due to positive earnings momentum, particularly from domestic activities, and its plans to dispose of €21 billion worth of assets, which will strengthen its balance sheet.
Goldman Sachs highlights the significant increase in the price of long-term corporate energy contracts in the US, known as power purchase agreements, and states that this development is a positive indication for the renewables sector. The bank concludes that after years of declining returns, the renewable industry is now poised to experience a reversal in trends.
Source: energyportal.eu
