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Goldman: The market is missing these ‘compelling’ global stocks — and 2 are on its conviction list


Goldman Sachs has named a number of European renewable energy stocks it says the market is missing — and says it expects the sector to bounce back after a period of declining returns. “We believe the market has overlooked the strong increase in the top line of [renewable energy storage] projects,” the analysts led by Alberto Gandolfi stated in a July 19 note to investors. The growth in renewable energy is “highly compelling,” the bank said, owing to the European energy crisis, a decline in costs for wind and solar energy, and the European Union’s focus on mitigating climate change. The bank is buy-rated on stocks including RWE , Orsted , EDP Renewables , ENEL and SSE . The bank said the market has overlooked German company RWE’s company’s upside potential. “RWE is among the best-placed [renewable energy storage] developers to capture the expanding addressable market in the US, Germany and the rest of Europe,” the analysts stated. “Our price target implies [more than] 50% upside from current share price levels.” Goldman is also buy-rated on Danish company Orsted, saying a recent meeting with investors “could mark a new beginning for Orsted, due to a better outlook on: profits, leverage and returns.” Another Goldman favorite is Scottish firm SSE, which the bank likes for its investment in new projects. “We see higher power prices and thermal generation profits adding to the cashflow the company has to invest. As the pipeline builds we expect the company to unlock further value,” the analysts stated. Conviction list stocks Two of Goldman’s stock picks are on its conviction list of most favored stocks. Spanish firm EDP Renewables is buy-rated for Goldman due to an estimated 13% increase in compound annual growth rate between 2022 and 2027 and the bank said the stock is “currently pricing in close to zero for future growth.” Italian firm Enel is also on Goldman’s list due to “positive earnings momentum, mostly thanks to stronger profits from domestic activities,” the analysts wrote. Enel is set to dispose of 21 billion euros ($23.2 billion) worth of assets, meaning the company will have “one of the strongest balance sheets in the industry,” they added. Goldman said the price of U.S. power purchase agreements — long-term corporate energy contracts — had increased around 70% since 2020, per data from research company LevelTen Energy, and said there are “significant” positives for the renewables sector because of this. “Following years of declining returns … the renewable industry is now set to experience a reversal in trends,” the analysts added.

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