Energy's in a supercycle and investors should own these stocks, says JPMorgan

Published Tue, Apr 26 202210:27 AM EDT

The global energy complex is in the midst of a supercycle, and with spending set to increase across all fuels JPMorgan has a number of "key equities" that should be on investors' buy lists. The firm said that as demand for energy grows, and with countries looking to shore up their fuel reserves, capital will flow to areas across the energy complex. Specifically, the firm favors companies with exposure to solar energy, liquified natural gas and oil. Within renewables utility company NextEra is among the firm's best ideas. "As the leader in the renewable development space, we expect NEE to fully capitalize on rapid renewables growth and investor interest in this arena," the firm wrote in a recent note to clients. "With high growth visibility, we see NEE shares as attractively valued, especially when compared to renewable operators," the firm added. JPMorgan has an overweight rating on the stock and a $96 target, which is about 30% above where shares closed Monday. The firm also likes residential solar installer Sunrun . The California-based company is the largest home solar installer in the U.S. Sunrun also offers battery storage systems and at-home electric vehicle charging, among other products. "As retail prices of power continue to increase, we expect the penetration rate of residential solar and storage to increase further" JPMorgan said. The firm anticipates the stock more than doubling, hitting $56 per share. Shares of Sunrun stood at $20.55 as of Monday's close. Renewable energy has hurdles, however, most notably when the sun isn't shining or the wind isn't blowing. While batteries are becoming more powerful, they are not yet able to store several days or weeks worth of energy, meaning there has to be an interim solution. JPMorgan said natural gas can kick in when renewable energy sources aren't generating enough power. "We believe greater adoption of variable renewable technologies will require gas to meet supply imbalances during periods of low renewable generation, and LNG stands out for its capacity to be transported globally," the firm noted. JPMorgan highlighted Cheniere and Shell as attractive bets. For Cheniere, the firm said the company will benefit from more U.S. LNG being sent to Europe as the bloc moves away from dependence on Russian energy. "Cheniere recently received DOE approval authorizing incremental export capacity, leading us to believe more capacity creep will be on the way," the firm said. JPMorgan's $169 price target on the stock is 29% above where shares closed on Monday. Companies focused on oil will benefit too, with JPMorgan forecasting demand growth for through the end of the decade. "We see oil's role in the energy mix as largely non-fungible with energy sources biased to power gen at least to 2030," the firm said. The firm's best ideas include Exxon and Marathon Oil . "In a period of overall energy tightness, we think that XOM could see a synchronized period of above-normalized earnings across the entire portfolio," JPMorgan said. The firm has a $100 target on the stock, which is roughly 12% above where the stock closed on Monday. When it comes to Marathon Oil, JPMorgan noted that the company is one of the lowest cost U.S. shale producers "with a diversified asset base across several basins." - CNBC's Michael Bloom contributed reporting.

The Cheniere Sabine Pass Liquefaction facility in Cameron, Louisiana, on Thursday, April 14, 2022.

Mark Felix | Bloomberg | Getty Images

The global energy complex is in the midst of a supercycle, and with spending set to increase across all fuels JPMorgan has a number of "key equities" that should be on investors' buy lists.

The firm said that as demand for energy grows, and with countries looking to shore up their fuel reserves, capital will flow to areas across the energy complex.