The renewable energy industry faces an uncertain future, but UBS sees promising prospects for the sector in the year ahead and lists two global stocks with upside potential of more than 55%. The industry has been thrust into the spotlight after U.S. President-elect Trump vowed to cut subsidies for renewable energy. “For the United States, the most important single market for many European utilities, we believe this concern is overdone,” analysts at UBS outlined in a Dec. 18 note, citing Trump. The performance of renewable energy during the previous term noted that the industry’s growth “is likely to continue… driven by state and corporate emissions targets.” Analysts note that renewable energy stocks will underperform between 2021 and 2024, mainly due to rising UK and US government interest rates and balance sheet concerns. They added: “The industry is crowded with money not only from utility companies, but also from oil and gas companies and financial investors looking for attractive ROIC-WACC (return on invested capital – cost of capital) spreads.” The ROIC-WACC spread measures the difference between a country’s real return on investment and the prevailing inflation rate. Looking ahead to 2025, analysts see some positives, including tighter discipline across the industry and an easing of supply chains. They also point to other benefits, such as the potential for higher multi-year returns on new projects and lower bond yields. Against this backdrop, analysts noted that European stocks appear “unrealistically cheap.” Stocks to watch UBS is looking at stocks including renewable energy developers Orsted and RWE as their “growth risks and exposure to electricity prices are more limited”. Orsted’s shares are listed on Nasdaq Copenhagen, Denmark, and trade in the United States as American Depositary Receipts (ADRs) under the symbol DNNGY. UBS has a buy rating on the stock with a target price of 520 Danish kroner ($72.50), which represents an increase of approximately 60.4% from the December 31 share price. The Swiss bank also has a buy rating on RWE, with a price target of 45 euros ($47), which implies an upside of about 56.1%. The German energy giant’s shares are listed on the Frankfurt Stock Exchange and trade as American depositary receipts under the ticker RWEOY.
UBS focuses on 2 renewable energy stocks, expected to rise more than 55% in 2025 | Real Time Headlines
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