Credit Suisse names its top clean energy stocks — and says one could rally more than 150%

Published Sun, Jan 9 202210:30 PM EST

The renewable energy sector is about to be disrupted, according to Credit Suisse , which has a list of stock picks to play it. A new round of "disruptive innovations" will elevate demand for global renewables over the next decade by making them "more economical, efficient and available," the bank's analysts, led by Alex Liu, said on Jan. 4. These disruptions will reduce the costs of solar and wind power by 33% and 25% respectively by 2025, while doubling global solar and wind installations within the same period, according to the bank's forecasts. Though such innovations are typically viewed as a threat to incumbents, Credit Suisse is adamant that existing leaders in the renewables sector will be continue to benefit. "[The market] has not yet fully priced in the resilience and strengths the existing leaders have over the next innovation cycle, and the demand and growth upside from the innovations to be further priced in," Liu said. Stock picks Texas-based FTC Solar is one of Credit Suisse's picks within the solar industry. The company manufactures solar trackers, a market the bank believes is growing faster than the global solar market. The company also enjoys revenue visibility this year with its "strong backlog" of orders and a healthy balance sheet, Liu said. The bank has a price target of $18 on the stock — an implied upside of 157% to its closing price of $7 on Jan. 4. The bank also likes Chinese solar firm Longi Green Energy as a "key beneficiary" of a demand recovery. Liu expects solar demand to rebound in and around early February on higher polysilicon supplies and further module price cuts. The company's ongoing vertical integration will also position it well to offset margin pressures relative to its peers, Liu added. The bank has a price target of 130 Chinese yuan ($20.50) on the stock, representing a potential upside of 53% to its closing price of around 85 Chinese yuan on Jan. 4. Solar cell manufacturer Tongwei also makes the bank's list. The bank has the fastest capacity expansion in the industry and should achieve more market share in the long term, Liu said. Credit Suisse has also forecast "high profitability" for the company this year. The bank has ascribed a price target of 75 Chinese yuan on the stock — an implied upside of 74% to its closing price of around 43 Chinese yuan on Jan. 4. Nasdaq-listed Shoals Technologies is another of the bank's picks, with the company benefiting from its "patented product and technology" and "strong growth opportunities" beyond solar, Liu said. Credit Suisse has a price target of $37 on the stock, representing a potential upside of 61% on its closing price of around $23 on Jan. 4. Italian energy firm Enel is one of Credit Suisse's picks within the wind power space. The bank noted the company's "sizable" project pipeline which provides high visibility on the company's growth targets, Liu said, while its vertical integration will see the company's margins grow nearly threefold in the next 10 years, he added. Credit Suisse's price target of 9.20 euros ($10.40) on the stock implies a potential upside of 31% to the stock's closing price of around 7 euros on Jan 4. The bank also likes Portuguese utilities firm EDP. The company's farm-down model — a build-sell-operate model in which utilities sell stakes in its assets for project financing — has been "successful," Liu said, with the company on track to raise total proceeds of 8 billion euros by 2025. The company's growth targets have not been affected by supply chain constraints, Liu added. The bank has a price target of 5.50 euros on the stock — an implied upside of 12% to its closing price of around 4.90 euros on Jan. 4.

Solar panels on a solar farm.

Victor De Schwangerg | Science Photo Library | Getty Images

The renewable energy sector is about to be disrupted, according to Credit Suisse, which has a list of stock picks to play it.