20 stocks expected by Goldman Sachs to gain the most from clean-energy spending

President Joe Biden signed the Inflation Reduction Act (IRA) into law in August. Then he followed up with the fiscal 2023 omnibus appropriations bill on Dec. 23.

Now that we are all done celebrating the new year, Goldman Sachs has listed 20 companies that its analysts expect to see the greatest benefits to earnings or share prices from the IRA’s authorized $391 billion in spending on clean-energy and climate-change initiatives over a 10-year period, according to this IRA summary by the Committee for a Responsible Federal Budget.

When the IRA was passed, some investors were worried that they pay a price for some of its provisions, such as a 1% tax on corporate-share buybacks or a 15% minimum federal income tax for companies. But Goldman is taking a different view with its list of companies poised to grow rapidly, in part as a result of new government spending.

This is obviously a long-term investment story. That means investors looking to ride the tailwinds of this spending need to commit for many years.

On Jan. 2, Goldman Sachs chief risk officer Brian Lee listed the investment bank’s “top 20 buy-rated stock ideas,” based on “quantifiable” benefits from IRA spending.

Lee placed the companies into groups based on Goldman’s estimates of percentage “IRA impact” to the companies earnings per share or to their stock prices. You might reasonably expect companies tied to solar energy and electric vehicles to dominate the list, but there are also industrial names featured.

Here they are, grouped by Goldman’s four “IRA impact” estimate buckets, and then by the 12-month upside implied by the investment bank’s price targets. Share prices and targets are in local currencies where the stocks are listed, as indicated by the tickers.

Company

Ticker

Estimated “IRA impact” on EPS or share price

Dec. 30, 2022, price

Goldman Sachs price target

Implied 12-month upside potential

Freyr Battery

FREY 50% or more

8.68

19

119%

Darling Ingredients Inc.

DAR 50% or more

62.59

110

76%

Maxeon Solar Technologies Ltd.

MAXN 50% or more

16.06

27

68%

First Solar Inc.

FSLR 50% or more

149.79

231

54%

Array Technologies Inc.

ARRY 50% or more

19.33

29

50%

Enphase Energy Inc.

ENPH 50% or more

264.96

379

43%

Green Plains Inc.

GPRE 50% or more

30.50

43

41%

MasTec Inc.

MTZ 50% or more

85.33

105

23%

Tesla Inc.

TSLA 25% to 50%

123.18

205

66%

SolarEdge Technologies Inc.

SEDG 25% to 50%

283.27

416

47%

Brookfield Asset Management Ltd. Class A

BAM 25% to 50%

28.67

40

40%

Republic Services Inc.

RSG 5% to 25%

128.99

173

34%

Waste Management Inc.

WM 5% to 25%

156.88

196

25%

Archer-Daniels-Midland Co.

ADM 5% to 25%

92.85

107

15%

Air Products and Chemicals Inc.

APD 5% to 25%

308.26

355

15%

Linde PLC

LIN 5% to 25%

326.18

375

15%

Baker Hughes Co. Class A

BKR 5% to 25%

29.53

32

8%

Nel ASA

NO:NEL 5% to 25%

13.86

15

8%

General Electric Co.

GE 5% to 25%

83.79

90

7%

Industrie De Nora SpA

IT:DNR 5% or less

14.34

24

67%

Sources: Goldman Sachs, FactSet

Click on the tickers for more information about the companies, including business profiles.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The inclusion of 12-month price targets might seem contradictory for a long-term investment idea. One year is a short period when considering a 10-year government spending plan. But that is the way broker’s set their price targets — a Wall Street tradition.

Lee expects many of the listed stocks to see benefits from the federal spending this year, while others “may see a bit more of an out-year impact.”

The latter group, with benefits expected to begin to accrue in 2025 or later, include Maxeon Solar Technologies Ltd.
MAXN,
Green Plains Inc.
GPRE,
Baker Hughes Co.
BKR,
Freyr Battery
FREY,
Air Products and Chemicals Inc.
APD
and Linde PLC
LIN.

Don’t miss: These 20 energy stocks are worth a look if you think oil prices will soar in 2023

Simonne Stigall

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