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Bullish Morgan Stanley Energy Picks Focus on Clean Energy Firms

As the global shift towards clean energy gains momentum, investors are keen to capitalize on new opportunities presented by sustainable and environmentally friendly energy sources. 

According to Morgan Stanley’s Andrew Percoco, two stocks in the clean energy sector show potential for 100% upside or better. These stocks, also rated as Strong Buys by the analyst consensus, could be worth considering for risk-tolerant investors looking to double their money.

Stem, Inc. (STEM) is the first Morgan Stanley pick. Stem offers a unique clean energy solution, combining renewable power and energy storage with artificial intelligence. The company provides smart battery systems and an AI-powered platform to optimize the connections between on-site power generation, grid power, and stored power, enabling customers to save between 10% and 30% on their energy utility bills.

Stem’s Athena platform, the most utilized system in its class, is available worldwide, with a footprint spanning 75 jurisdictions. The platform is in use at over 200,000 solar sites, managing more than 25 gigawatts of solar assets. Stem’s addressable market is expected to grow to $1.2 trillion by 2050. In 2022, the company recorded $363 million in revenue, an increase of 186% year-over-year.

Despite Stem’s shares falling 51% over the last 12 months, Morgan Stanley’s Andrew Percoco maintains an Overweight (i.e., Buy) rating on the stock, with a $12 price target indicating a 103% one-year upside potential. With 7 Buys and 1 Hold from the Street’s analysts, Stem has a Strong Buy consensus rating.

Sunnova Energy International (NOVA) is the second Morgan Stanley pick, a leader in the solar power sector. Sunnova’s operations encompass the entire solar installation process, including rooftop panel installations, home power system connections, power storage batteries, repairs, modifications, and parts replacement. The company also offers financing assistance and insurance for customers.

Operating in 40 US states, Sunnova has more than 279,400 active customers and works with a network of over 1,100 dealers, sub-dealers, and builders. In the fourth quarter of 2022, the company added 33,000 new customers, with a projection of 115,000 to 125,000 new customers in 2023.

Sunnova reported a 200% growth in revenues, from $65 million to $195.6 million, in the fourth quarter of 2022, surpassing expectations by more than $55 million. The company’s quarterly EPS came in at a net loss of 18 cents, but this was better than the forecasted 44-cent loss.

Morgan Stanley analyst Andrew Percoco sees Sunnova shares as offering attractive risk/reward, despite the potential for volatility. Percoco gives NOVA shares an Overweight (i.e., Buy) rating and a $35 price target, implying a 126% potential upside for the coming year. With 10 Buys and 2 Holds from analysts, Sunnova has a Strong Buy consensus rating.

As clean energy becomes an increasingly attractive investment sector, both Stem and Sunnova offer promising opportunities for investors looking to capitalize on the green energy economy.