Goldman Sachs names 6 green energy stocks with 'far superior' growth potential

Published Thu, Jul 15 20217:24 PM EDTUpdated Thu, Jul 15 20218:28 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts from Goldman Sachs have picked several so-called green energy stocks in Europe that they say offer "far superior growth potential," with an inflection point in the market expected "any day." Renewable power firms or "Green Energy Majors," which Goldman shortens to GEMS, underperformed the Stoxx 600 Europe index by an average of 25% in the year to date, according a note from Goldman published Sunday. But the bank said the European utilities sector as a whole had "meaningfully improved" due to falling interest rates, higher power prices and the growing traction of climate policies, among other factors. "As most GEMS price in 0-5 years of future growth (most of which is already secured or under construction) and offer three decades of above-market earnings growth (5%-10% pa), we continue to see the space as undervalued and attractive; as such the inflection point could arrive any day," the analysts stated. "Careful observation suggests that some GEMS … trade at a discount to the overall European market, while offering far superior growth potential," they added. The bank's buy-rated stock picks include: EDP Renewables , an electricity firm based in Madrid, Spain, which is on Goldman's conviction list. Italian energy firm Enel — which just signed a deal to supply Johnson & Johnson with renewable energy in a 10-year agreement — also on Goldman's conviction list. RWE , a German wind power firm, also makes the list. Spanish solar firm Solaria , which operates photovoltaic plants in Greece, Uruguay and Italy, as well as its home market. Danish firm Orsted , which in April said it would buy Brookfield Renewable's Irish and U.K. onshore wind business in a $684 million deal . French firm EDF and British company Centrica are picks on Goldman's "Legacy Activities" list. The analysts said they expect better earnings from renewable energy companies in the second half of the year, due to positive factors such as "more clarity" on President Joe Biden's $2 trillion infrastructure plan and the UN Climate Change Conference, known as COP26, to be held in Scotland this fall.

Solar panels on a solar farm.

Victor De Schwangerg | Science Photo Library | Getty Images

Analysts from Goldman Sachs have picked several so-called green energy stocks in Europe that they say offer "far superior growth potential," with an inflection point in the market expected "any day."