Evercore ISI just launched coverage on the clean energy sector. These are the firm's top picks

Published Mon, Apr 19 20216:18 PM EDT

Evercore ISI launched coverage on sustainable technology and clean energy stocks Monday evening, calling the energy transition an "investment mega theme." "We believe this transformation of the global economy will create enormous investment opportunities," the firm said, noting that more than $130 trillion will need to be spent between now and 2050 as renewable energy adoption accelerates. "This is a transformational effort; a complete energy, industry and mobility system overhaul," the firm said. Analysts led by James West compared the pace and scale of the investment needed to the oil shale revolution in the U.S., which saw production triple in the span of a decade. There are also parallels to the dawn of the internet age. The firm said that if 2020 kicked off the climate decade, 2021 will be the accelerant. With that in mind, here's how the firm rates some of the key players in the space. Enphase Energy , Sunnova , Sunrun and TPI Composites are among the firm's top picks in the space, and Evercore rates each name "outperform." The group has pulled back recently, along with other growth-oriented areas of the market, which creates a compelling buying opportunity. The firm said the group's fundamentals remain solid, and that technological advances, coupled with green stimulus programs, should provide further support. "Never in the history of renewable energy technologies has the backdrop been more conducive for success. The technology is proven and the costs are some of the lowest for any electricity production. The world is aligning on climate views," Evercore said. Falling solar costs combined with rising power prices should prompt more consumers to switch to rooftop panels, benefitting Sunrun along the way. As the largest residential solar company in the U.S., Sunrun "enjoys scale advantages in a massively underpenetrated market," the firm said. Evercore also added the California-based company to its small and mid-cap Core Ideas List. Analyst West sees Sunrun hitting $87 per share, which is about 79% above where the stock closed on Monday. The U.S. solar industry posted record growth in 2020, but overall penetration remains low. Just 3% of homes across the U.S. currently sport rooftop panels, according to Evercore, meaning there's a massive growth opportunity ahead. The firm is also bullish on Sunnova Energy International, which is based in Houston and went public in July of 2019. In a note titled "The roaring '20s: a decade of mass solar adoption ahead," Evercore said there are years of growth runway ahead for the company. Evercore said Sunnova's long-dated power contracts should "drive increasing profitability, along with a larger and more stable base of cash flows, as the company matures." Increased battery storage should act as an additional upside catalyst. The firm's $52 target is 49% above where the stock closed on Monday. Greater use of solar energy across the U.S. translates to higher demand for the physical equipment that power rooftop panels. This could lead to a potential sales boost for a company like Enphase Energy, which is the leader in the microinverter market. The firm said Enphase has a "dominant position" and is "well-positioned to benefit from strong solar installation market growth." "The market is underappreciating its expanding revenue opportunity as the company continues to take share in the U.S. residential market, expands its international presence, and enters the U.S. commercial and residential storage markets," West said. Enphase gained an eye-popping 570% in 2020, making it a standout within the clean energy sector which trounced the broader market last year. The stock has slid nearly 20% in 2021, however, amid concerns including the stock's stretched valuation. Evercore has a $184 target on the stock, which is 30% above where shares currently trade, but still far below the stock's all-time intraday high of $229.04. The clean tech space encapsulates more than just solar, of course, and Evercore is also positive on wind blade provider TPI Composites. "Strong policy tailwind and technology advantages should continue to drive the LCOE [levelized cost of energy] of wind energy lower," Evercore said, noting that an expected expansion into offshore wind blades within the next few years should drive further upside. The firm has a $65 target on the stock, pointing to a 33% bounce from Monday's closing price. - CNBC's Michael Bloom contributed reporting.

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Evercore ISI launched coverage on sustainable technology and clean energy stocks Monday evening, calling the energy transition an "investment mega theme."

"We believe this transformation of the global economy will create enormous investment opportunities," the firm said, noting that more than $130 trillion will need to be spent between now and 2050 as renewable energy adoption accelerates. "This is a transformational effort; a complete energy, industry and mobility system overhaul," the firm said.

Analysts led by James West compared the pace and scale of the investment needed to the oil shale revolution in the U.S., which saw production triple in the span of a decade. There are also parallels to the dawn of the internet age.

The firm said that if 2020 kicked off the climate decade, 2021 will be the accelerant. With that in mind, here's how the firm rates some of the key players in the space.