As global leaders increasingly pursue decarbonization plans and facilitate the deployment of electric vehicles (EVs), the renewable energy industry is expected to witness unprecedented demand. According to the Global Energy Review 2021, renewable electricity generation is expected to expand by more than 8% to 8 300 TWh this year, representing the sector’s fastest year-over-year growth since the 1970s.
Favorable government policies and the declining costs of renewable technologies are expected to drive the renewable energy market further. The global renewable energy market is expected to reach $1.9 trillion by 2026, achieving an 8.3% CAGR from 2021. However, while many renewable energy players are capitalizing on the industry tailwinds, some are struggling due to intense competition for market share.
So, we think It could be wise to avoid renewable energy stocks Brookfield Renewable Partners L.P. (BEP), Sunnova Energy International Inc. (NOVA), and VivoPower International PLC (VVPR) because of their weak financials and bleak growth prospects.
Brookfield Renewable Partners L.P. (BEP)
Based in Toronto, Canada, BEP is one of the largest publicly traded renewable power platforms and an experienced global owner, operator, and investor in wind and solar, distributed generation, and storage facilities. BEP’s businesses include Real Estate, Infrastructure, Renewable Power, Private Equity, Oaktree, and Insurance Solutions.
In July, BEP collaborated with Trane to offer decarbonization services to commercial, industrial, and public sector customers. While this innovative solution will help customers meet sustainability targets and upgrade and install infrastructure, it could negatively impact BEP’s near-term cost structure.
BEP’s revenue increased 8.2% year-over-year to $1.02 billion in the second quarter, ended June 30, 2021. However, its net loss increased 50% from the year-ago value to $63 million. The company’s loss per LP unit increased 18.2% from the prior-year quarter to $0.13. Also, the company’s net change in working capital was negative $391 million, while its interest expense stood at $246 million.
BEP has failed to beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to remain negative in the current year and the following year. Moreover, the stock has lost 4.4% in price year-to-date.
BEP’s POWR Ratings are consistent with this bleak outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BEP has a D grade for Value and Momentum. We’ve also graded BEP for Growth, Stability, Quality, and Sentiment. Click here to access all BEP’s ratings. The stock is ranked #9 of the 10 stocks in the MLPs-Other industry.
Sunnova Energy International Inc. (NOVA)
NOVA is a leading national residential solar company that delivers unparalleled services and access to clean, affordable, and reliable energy with more choices and customized options. The Houston, Tex.-based company provides services, such as Home Solar, Home Solar, and Battery Storage, Roof Replacement, Home Solar Protection, and Financing Options.
Last month, the company offered $400 million of green senior notes due 2026 in a private placement. NOVA plans to allocate an amount equal to the net proceeds from the offering to finance its green projects. However, this move could result in a dilution of shareholder value.
For the second quarter, ended June 30, 2021, NOVA’s revenue increased 55.5% year-over-year to $66.56 million. However, the company’s total operating expenses increased 68.8% from its year-ago value to $80.9 million. Its operating loss increased 178.9% from the prior-year quarter to $14.34 million. Also, the company’s net loss increased 130.7% year-over-year to $66.27 million.
NOVA’s EPS is expected to remain negative in its fiscal years 2021 and 2022. Analysts expect its EPS to decline 18.1% in the fiscal period ending December 2021. The stock has declined 20.9% in price year-to-date and 2.7% over the past six months.
NOVA’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. Also, the stock has an F grade for Value, Sentiment, and Quality.
In addition to the POWR Rating grades I’ve just highlighted, one can see NOVA’s ratings for Growth, Stability, and Momentum here. NOVA is ranked #17 of 19 stocks in the F-rated Solar industry.
VivoPower International PLC (VVPR)
VVPR is a London-based battery technology, EV , solar and critical power services company. It provides solutions that encompass EVs, solar systems, battery technology, microgrids, and critical power services.
In July, VVPR secured full ownership of the remaining 50% of the equity interest in its solar development portfolio in the United States from Innovative Solar Systems LLC. But this acquisition could weigh heavily on VVPR’s expenses in the coming months.
For the fiscal year ended June 30, 2021, VVPR’s group revenue declined 15.8% year-over-year to $40.4 million. The company’s group gross profit decreased 11.3% from its year-ago value to $6.3 million. Its net loss increased 56.9% from the prior-year period to $8 million. Also, the company’s adjusted EBITDA stood at negative $1.4 million, compared to a $3.9 million adjusted EBITDA in the prior-year period.
The company’s EPS is expected to decline 50% next year. VVPR’s EPS is expected to remain negative in the fiscal period ending June 2022 and in the fiscal period ending June 2023. Moreover, the stock has declined 14% in price over the past month and 26.2% over the past three months.
It’s no surprise that VVPR has an overall F rating, which equates to a Strong Sell in our POWR Rating system. The stock has an F grade for Quality, and a D for Value and Growth.
Click here to see the additional POWR Ratings for VVPR (Momentum, Stability, and Sentiment). VVPR is ranked #15 in the Solar industry.
BEP shares were trading at $40.33 per share on Wednesday afternoon, down $0.94 (-2.28%). Year-to-date, BEP has declined -5.83%, versus a 21.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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