Clean energy stocks had quite a rally last year, as reflected by the 140% gain by the iShares Global Clean Energy ETF (ICLN). However, 2021 has been less than optimal for this industry, with ICLN down more than 24% year-to-date (YTD).
However, this correction is a buying opportunity for investors looking to take advantage of this fast growing industry. The global solar market is expected to reach $223.3 billion by 2026, growing at a CAGR of 20.5%, the electric vehicle (EV) market expected to grow at a CAGR of 21.1% by 2030, and the critical power and cooling market will grow at a CAGR of 8.88% through 2021.
With this in mind, today I’m going to analyze three clean energy stocks currently trading under $10 a share: VivoPower International (VVPR), SPI Energy (SPI), and Ocean Power Technologies (OPTT).
VivoPower International PLC
VivoPower International (VVPR) is an international battery technology, electric vehicle, solar, and critical power services company. VVPR operates in Australia, Canada, the Netherlands, the United States, and the United Kingdom. The company, based in London, the United Kingdom was founded in 2014 and went public in January 2017.
The company’s revenue decreased 28% year-over-year to 22.7M for its 1H FY2021, which ended December 31. This decrease was caused due to strict COVID-19 lockdowns in Australia. Currently, the lion’s share of revenues generates a critical power services segment. The company’s revenue structure is highly diversified, coming from over 700 various customers and multiple industries. Gross Profit also decreased 17% year-over-year to $4.6M while gross margin saw improvement by 2 bps, growing to 20%. The company’s cash on hand also increased in 1H FY2021, rising from $2.2M in Q1 to $17.4M as of December 31, 2020, due to capital raise in October 2020 as well as refinanced shareholder loan with lower interest rate and longer maturity. The aforementioned actions strengthened VVPR’s liquidity position.
Let’s take a look at some valuation metrics. In terms of EV/Sales TTM, the stock’s 3.11x is 33.47% lower than the 4.67x sector median. Also, the company’s TTM P/S multiple of 2.16x slightly discounted to the sector’s median P/S ratio of 2.46x.
Putting it all together, we believe that VVPR is a great “Buy” candidate over a medium- and long-term horizon.
SPI Energy Co., LTD
SPI Energy (SPI) is a renewable energy company, headquartered in Sha Tin, Hong Kong, that delivers competitive, clean energy solutions to its customers. The company operates across five different business segments including renewable energy system solutions for residential and small commercial markets, renewable energy project development, design, build & transfer, smart EV & EV charger solution, and other renewable energy-related investments. Currently, the company has a market cap of ~ $160 million and trades around $6 per share.
Recently the company announced FY2020 results, SPI energy revenue was up around 42% on a year-over-year basis to $138.6M. The company reported GAAP loss per share of $0.4 compared to a $1.2 loss per share in the prior-year period. SPI’s operating income came in at $0.1M, up from an operating loss of $19M in 2019. The company also improved its gross margin from 7.3% in 2019 to 12.2% in 2020.
Moreover, the fiscal 2021 revenue guidance of $200-240 million implies about $55 million in sales per quarter. In our view, it’s a realistic scenario for SPI energy. Also, the SPI Energy P/S multiple of 0.71x looks undervalued compared to the sector’s median P/S ratio of 4.27x. Assuming next year’s sales of about $170 million in the base case and utilizing the current P/S multiple of 0.71x, the shares could see a 15% rise from the current levels.
Ocean Power Technologies
Ocean Power Technologies (OPTT) is an innovator of distributed offshore power solutions which provide persistent, reliable, and economical power and communications for remote surface and subsea applications. The company, based in Monroe Township, New Jersey was founded in 1984 and went public in June 2006.
Recently, Ocean Power Technologies announced the deployment of its floating system that generates power from ocean waves, PB3 PowerBuoy, for Enel Green Power in Chile. Management believes that it could help with their further expansion in Chile and South America.
On March 9, Ocean Power Technologies reported earnings for the third quarter of 2021. In Q3, total revenue has fallen 57.1% year-over-year to $0.3M. However, the loss per share stood at $0.09 compared to $0.46 for the same period in the prior year. As of January 31, 2021, the company had total cash of $80.4M and total debt of $2.21M, bringing its total net cash to $78.19M. In nine months ended January 31, 2021, the company also decreased its cash burn rate from $8.6M to $8.5M due to lower cash spending on customer projects and product development costs. Based on that, we would expect the cash on hand to be sufficient for at least 24 months.
When it comes to growth prospects, the estimated total addressable market for the Ocean Power Technologies activities is over $8 billion. Ocean Power Technologies initially targeting less than 5% of the given market, meaning that that company has a lot of room to grow in the future.
VVPR shares were trading at $6.52 per share on Tuesday morning, down $0.01 (-0.15%). Year-to-date, VVPR has declined -29.74%, versus a 11.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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