National Bank National Bank Financial analyst Rupert Merer thinks the shift toward green energy is “unstoppable” and sees “room for upside” in 2022, expecting an improved performance with stocks sitting at 52-week lows.
“Until recently, leadership in the energy transition has come from a few pioneers,” he said in a research report released Tuesday. “However, with a growing move towards decarbonization, participation in the transition has expanded. In 2022, this trend should continue and could support new partnerships and investment opportunities for energy transition focused stocks, and market consolidation. After a strong ‘20, stocks in our coverage were down 20 per cent on average in ‘21, with rising yields and a move out of green and growth stocks. Weakness has continued, with much of our coverage trading near 52-week lows. Here, we review some themes which should impact our universe in ‘22. With momentum behind the energy transition, the sector has good visibility on growth for decades, but could see headwinds from rising yields and continued impacts from the pandemic in the near-term.”
Mr. Merer emphasized the transition “belongs to everyone and will continue to accelerate,” however, after revising his valuations to account for recent underperformance, he trimmed his target for a series of stocks in his coverage universe.
His changes include:
* Anaergia Inc. (ANRG-T, “sector perform”) to $22 from $25. The average on the Street is $31.
“We expect 2022 to be an active year on the construction front for ANRG, leading to its Capital Sales segment having a good year as ANRG is in the process of completing current BOO projects and building new BOO RNG facilities around the world,” he said. “Indeed, given ANRG’s BOO segment construction activities are the main driver of revenues in its Capital Sales segment, we believe a busy year on the BOO construction front could drive good results from equipment sales. On the other hand, we expect BOO operational headwinds to persist in 2022 as RBF isn’t expected to be fully ramped up before the end of 2022 and while VVWRA should be commissioned early this year, it will likely face the same feedstock volume issues as RBF.”