Generac, Next Era Energy Partners downgraded as analyst favors Hannon Armstrong

By Steve Gelsi

JPMorgan shuffles ratings on clean energy stocks with HASI and TPIC as top picks

JPMorgan analyst Mark Strouse on Thursday downgraded Generac Holdings Inc. to neutral and cut Next Era Energy Partners to underweight as he sifted through first-quarter results from 11 clean energy companies.

Uncertainty around energy policy ahead of the U.S. presidential elections is a factor in the group, with Donald Trump speaking out against offshore wind development, while President Joe Biden has been more supportive of clean energy, Strouse said.

"We are shuffling our top picks to stocks that we believe are relatively best positioned to navigate what we expect to be a volatile remainder of the year," Strouse said in a research note. "While we continue to believe that utility-scale solar has the highest level of demand, macro factors that are impacting project timing and increasing geopolitical developments present risks."

Generator maker Generac Holdings (GNRC) remains "well-positioned to benefit from increased grid outage activity" in the U.S.'s aging electric infrastructure, but its stock price has risen about 18% so far this year, and it trading above JPMorgan's price target of $149.

For this reason, JPMorgan is stepping to the sidelines on the stock, he said.

Generac's stock was down by 0.8% in premarket trades on Thursday.

Next Era Energy Partners (NEP) has risen about 25% in the past month, along with a 19% rise by its parent company, Next Era Energy (NEE), with a closing level Wednesday of $34.55 a share, above JPMorgan's price target of $25 a share.

"We do not view NEP as a primary beneficiary of rising power demand....and its ability to accretively finance potential dropdown acquisitions," Strouse said. He downgraded the stock to underweight from neutral.

Next Era Energy Partners stock fell 2.1% in premarket trading.

Strouse also reiterated overweight ratings on wind turbine blade maker TPI Composites (TPIC) and renewable energy investor Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI) and singled out the two stocks as his top picks in the group.

TPI Composites rose 0.5% in premarket trades, while Hannon Armstrong moved up by 0.4%.

JPMorgan remains overweight on Fluence Energy (FLNC), GE Vernova (GEV), Nextracker (NXT), First Solar Inc. (FSLR), Array Technologies (ARRY) and Shoals Technologies (SHLS).

It has a neutral rating on Ormat Technologies (ORA).

-Steve Gelsi

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05-23-24 0733ET

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