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JPMorgan on clean tech stocks: It’s going to get worse before it gets better

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There could be more pain ahead for clean technology stocks but there may be a buying opportunity for long-term investors, according to JPMorgan. Analyst Bill Peterson said clean technology stocks have seen sentiment become even more challenged following the second-quarter earnings cycle, as investors struggle to digest sliding demand trends, inflation and project delays. Clean technology stocks have fallen about 22% since 2023 began by JPMorgan’s calculations, while the technology-heavy Nasdaq Composite has climbed around 21%. “Despite several positive catalysts on the horizon, we think the Clean Tech universe will likely see sentiment worsen before it gets better,” Peterson told clients Friday. Investors may be holding back on long positions and trimming holds given higher-for-longer interest rate concerns, slowing growth on the top line and a tough environment for raising capital, he added. Given this backdrop, the analyst said the stocks should stay in “defense mode” while being cautiously optimistic on demand until the outlook around the economy and consumer interest becomes clearer. The firm now expects a more difficult 2024 with multiple compression likely. But he also emphasized that the recent pullback also presents a buying opportunity for longer-term investors, even if third-quarter earnings are muted. Here are a few of the names he recommends: For investors looking for places to hide in the sector, he said hydrogen and electric vehicle charging are considered relatively safer in the long term, even though the upcoming third-quarter earnings reports will likely be muted. Given this, he pointed to Plug Power and ChargePoint , saying both have leadership and relative maturity in their markets. He also said those markets will unlock at the right moment. Plug Power, which provides hydrogen fuel cell turnkey solutions, has dropped about 50% this year. But the average analyst sees a rebound ahead, with a buy rating and price target reflecting a rally of more than 146%, according to LSEG, formerly known as Refinitiv. Electric vehicle charging stock ChargePoint has performed even worse in 2023, tumbling more than 74%. However, the average analyst polled by LSEG has a buy rating with an expected upside of nearly 320%. Elsewhere, he called silicon battery maker Enovix a long-term winner with strong management. The stock has fallen more than 29% this year, but analysts surveyed by LSEG also have a buy rating and an average price target implying an upside of more than 251%. — CNBC’s Michael Bloom contributed to this report.

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