What happened
With earnings season in full swing, stocks across sectors are making some dramatic moves. Yet, when stocks that were languishing in recent weeks clock big gains in just about five days, it pays to find out whether it's a dead-cat bounce or a sustainable recovery. Take clean energy stocks, for example. Here are three top-performing stocks from the industry and the percentage by which they rose at their highest points in five days as of 2 p.m. ET on Friday, according to data provided by S&P Global Market Intelligence:
The point to note is that beyond earnings, there was one huge common link among all three stocks that sent them flying. In fact, investors and analysts alike believe this could be the biggest catalyst yet for these renewable energy stocks.
So what
Both Plug Power and Bloom Energy reported their second-quarter numbers this week. Both companies missed analysts' estimates, but that didn't stop the hydrogen stocks from surging. There's a reason why.
In Plug Power's case, the hydrogen fuel cell specialist reiterated its 2025 goals of $3 billion in annual revenue and a gross margin above 30%. That signals significant growth ahead given that the company generated a negative gross margin in its last quarter and expects to generate revenue of around $915 million at the midpoint this year. However, that still means Plug Power's revenue could grow by almost 80% this year.
Bloom Energy stuck with full-year revenue guidance of $1 billion to $1.15 billion versus the $972.2 million it generated in 2021. Nonetheless, its outlook means 2022 will be a record year for Bloom Energy, with the fuel cell maker also expecting to turn operating cash flow positive this year. That should be a milestone for the company.
With global interest in green hydrogen rising, Plug Power and Bloom Energy are clearly making great strides. Their growth story, however, took an even better turn this week after a surprising development that caught nearly everyone by surprise -- the U.S. Senate passing the Inflation Reduction Act.
Now what
The market's excitement about clean energy stocks isn't unwarranted. The Inflation Reduction Act, after all, is a sweeping bill covering healthcare, taxes, and climate change. Above all, it is similar to President Joe Biden's Build Back Better Plan, which proposed big things but was eventually shelved last year after Democratic Sen. Joe Manchin pulled the plug on further negotiations. With Manchin himself now backing the Inflation Reduction Act, big federal incentives to boost the clean energy industry are closer than ever to reality.
The legislation proposes $369 billion for climate change projects and includes tax credits on green hydrogen and the extension of the alternative fuels tax credit. Not surprisingly, several analysts bumped up their price targets on clean energy stocks, and investors bet big money on Plug Power, Bloom Energy, and Clean Energy Fuels this week.
While Plug Power and Bloom Energy are the largest hydrogen players, Clean Energy Fuels produces a transportation fuel from organic waste called renewable natural gas (RNG). It is the largest RNG provider in the U.S. and counts e-commerce giant Amazon.com among its key clients. Just days ago, Clean Energy Fuels also reported a significantly lower net loss for its second quarter.
With the Inflation Reduction Act expected to pass the House in the coming days and eventually be signed into law, these clean energy stocks could head even higher.
