Clean energy stocks jump as Georgia results roll in

Published Wed, Jan 6 20213:48 PM EST

(This story is for CNBC PRO subscribers only.) Clean energy stocks jumped on Wednesday, accelerating their strong start to the year following a record-setting 2020, as investors eyed the results of the Georgia Senate runoffs. President-elect Joe Biden has made climate a central pillar of his agenda, and a possible Democratic-controlled Congress would make it easier to pass policies that are supportive for renewables. The Invesco Solar ETF gained more than 8% on Wednesday, while the Invesco WilderHill Clean Energy ETF and iShares Global Clean Energy ETF each traded more than 6% higher. "Investors in this space seem to be focused on longer-term scenarios more than at any point in the past several years, which we believe could result in further upside to the stocks despite likely little impact to near-term estimates," JPMorgan said Wednesday in a note to clients in which the firm recommended staying long the sector. JPMorgan analyst Paul Coster pointed to the U.S. rejoining the Paris Agreement, as well as federal agency appointments as supportive catalysts for the group. But given that renewables posted a record year in 2020 under the Trump administration, Rene Reyna, head of thematic and specialty product strategy at Invesco, said that supportive policies are "icing on the cake." In other words, it's an added positive for an already rosy outlook. "The fundamentals have strengthened. A lot of that is due to the underlying cost and efficacies that are taking place. You have technology improving, you have cost dynamics becoming more favorable," he said to CNBC. "You've hit a state where although subsidies will be well received, you don't necessarily need them anymore," he added. Solar stocks were among the outperformers on Wednesday. SunPower jumped 25%, while Sunrun and Sunnova gained 16% and 11%, respectively. Enphase Energy and SolarEdge Technologies each rallied more than 12%. The eye-popping rally brings each company's year-to-date gain to at least 12%, after just three days of trading in 2021. And that builds on a record 2020 that saw all of these names return in excess of 300%. Enphase Energy, for instance, gained 570% last year. Even so, Goldman Sachs upgraded the stock to a buy rating this week, saying there's still plenty of upside ahead. However, Reyna noted that while he remains positive on the group both near and long-term, pullbacks are inevitable, especially after 2020's return when both Invesco funds gained more than 200%. Analysts at Simmons Energy also pointed to stretched valuations as a possible cause of concern for investors. "Renewables could experience some digestion of 2020's stellar gains ... Accordingly, investors should prepare themselves for increased scrutiny as well as volatility and, perhaps, buy-the-dip entry points," analyst Pearce Hammond wrote in a note to clients. The final results of the Georgia special elections were still not in by Wednesday afternoon. Democrat Raphael Warnock is projected to win the Georgia U.S. Senate special election runoff against incumbent Republican Kelly Loeffler, according to NBC News. In the other Senate runoff election, Democrat Jon Ossoff was leading Republican Sen. David Perdue, but NBC said the race was too close to call. Even if Democrats do wind up taking the Senate, however, some of Biden's more ambitious initiatives — including his $2 trillion climate plan — might face opposition. But policy at the local and state level can pick up some of the slack where federal initiatives might face opposition. JPMorgan's Coster said a Democratic sweep would benefit companies with the most exposure to the U.S. market. The firm's top picks are Sunrun, Sunnova and Hannon Armstrong , all of which it rates at overweight. Meanwhile, Simmons Energy said it favors utility company NextEra Energy Partners since it "benefits directly from the energy transition." So-called ESG investing, or when a company's environmental, social and governance policies are evaluated, has been another key driver behind the jump in renewable stocks. For large investors looking for companies focused on climate, there's a limited supply of names with sufficient market capitalization. Assets in ESG-focused funds topped $1 trillion for the first time on record in 2020 despite the Trump Administration's efforts to limit this type of investing, including in 401k plans. "ESG is moving forward no matter who is in the White House," noted TrueMark Investments chief investment officer Jordan Waldrep. "But a Biden administration means ESG now has a tail wind in the form of friendly regulations and literally trillions of dollars of support over the next 4 years. That has the potential to supercharge the advancement of clean energy alternatives and fundamentally improve our energy production and infrastructure." - CNBC's Michael Bloom contributed reporting.

Solar panels above a Brooklyn neighborhood overlooking Manhattan.

Jeff Morganteen | CNBC

(This story is for CNBC PRO subscribers only.)

Clean energy stocks jumped on Wednesday, accelerating their strong start to the year following a record-setting 2020, as investors eyed the results of the Georgia Senate runoffs. President-elect Joe Biden has made climate a central pillar of his agenda, and a possible Democratic-controlled Congress would make it easier to pass policies that are supportive for renewables.

The Invesco Solar ETF gained more than 8% on Wednesday, while the Invesco WilderHill Clean Energy ETF and iShares Global Clean Energy ETF each traded more than 6% higher.

"Investors in this space seem to be focused on longer-term scenarios more than at any point in the past several years, which we believe could result in further upside to the stocks despite likely little impact to near-term estimates," JPMorgan said Wednesday in a note to clients in which the firm recommended staying long the sector.