National Bank While green energy stocks “suffered” in 2022, National Bank Financial analyst Rupert Merer expects energy securiyy and climate concerns to drive growth in the year ahead.
“At the start of 2022, stocks in our coverage related to the energy transition were supported by the global push towards clean energy for climate change and energy security concerns,” he said. “However, with higher yields, supply chain issues, liquidity concerns and operational challenges, the sector saw a valuation reset. With strong support for the sector in 2023 and some contracted cash flows, the companies should generally perform well despite recession concerns. Access to capital could be a challenge for some.”
In a research report released Tuesday titled Energy transition is the unstoppable solution to climate change and energy supply concerns, Mr. Merer maintained “a generally positive outlook” for 2023, but he thinks continued market headwinds could continue to hurt share price performance, leading him to lower his expectations “with higher discount rate and lower multiple assumptions across much of our coverage.”
”In general, a continued push toward the energy transition should be supported by government regulation and subsidies, falling costs of technology, and a continued energy crisis which has put pressure on energy costs,” he said. “The opportunities lie across the world, for renewable energy, EV’s, hydrogen and materials companies. The focus for investment could be closer to home for most companies, and we believe capital recycling should continue to be a source of financing in weak markets.”
He named five stocks as his top picks for the year:
- Innergex Renewable Energy Inc. ( “outperform”) with a $23 target. The average target is $20.48.
- Altius Renewable Royalties Corp. (“outperform”) with a $13.50 target. Average: $14.38.
- Polaris Renewable Energy Inc. (“outperform”) with a $21 target. Average: $27.57.
- Northland Power Inc. (“outperform”) with a $46 target, down from $47 previously. Average: $47.73.
- 5N Plus Inc. ( “outperform”) with a $3.75 target. Average: $3.50.
Mr. Merer also made these other target adjustments:
- Ballard Power Systems Inc. ( “sector perform”) to US$7 from US$8. Average: US$8.29.
- Boralex Inc. ( “outperform”) to $47 from $48. Average: $47.69.
- Brookfield Renewable Partners LP (“outperform”) to US$33 from US$35. Average: US$39.16.
- Loop Energy Inc. ( “outperform”) to $2.50 from $5. Average: $2.70.
- NanoXplore Inc. (“outperform”) to $6 from $8. Average: $6.82.
- Next Hydrogen Solutions Inc. (“sector perform”) to $2 from $2.50. Average: $3.25.
- TransAlta Renewables Inc. ( “sector perform”) to $14.25 from $15.50. Average: $14.23.