Tesla Stock Surge Means Big Things for Renewable Energy Stocks
This year has been nothing short of extraordinary for Tesla Inc (NASDAQ:TSLA). So far in 2020, the company has shown that is able to deliver on its promises, leading to massive Tesla stock gains. But what’s even better news for you, dear reader, is that the gains are nowhere near done (and not just for TSLA stock).
Allow me to explain.
Right now, Tesla stock is sitting at gains of about 120% since the year began. Not bad at all for just a few months.
Chart courtesy of StockCharts.com
TSLA stock is now quickly soaring toward being worth over $1,000 a share. That’s a pretty hefty price, up significantly from when I began writing about the company back in 2016.
But here’s where it gets really good: Tesla stock’s success has opened the door for other renewable energy stocks to see huge gains.
We’ve seen this type of thing before, wherein one company in an emergent industry does so well that it serves as a proof of concept for other companies like it. Investors are clearly sold on clean energy stocks, and that means opportunities abound to make some serious profits.
Consider that, for a long time, Tesla stock was considered by many to be bloated and overvalued—and that was way back when it was worth a paltry $200.00 per share. Now around $800.00 per share, we’ve seen that many of the doubters and short-sellers were wrong, and are likely kicking themselves.
And the reason they were wrong is plain for all to see: the future is in renewable energy stocks. No matter what you believe about climate change, the fact is that we’re seeing trillions of dollars flood into this market.
The UN estimated that $2.6 trillion was invested in new renewable energy capacity (not including large hydro) from 2010 to 2019. That’s more than triple what was invested in the sector in the previous decade. (Source: “Global Trends in Renewable Energy Investment 2019,” United Nations Environment Programme, last accessed February 26, 2020.)
Bloomberg L.P. reported that more than $332.0 billion was invested in green energy just in 2018. (Source: “Clean Energy Investment Exceeded $300 Billion Once Again in 2018,” Bloomberg NEF, January 16, 2020.)
What those numbers mean is that this industry is going nowhere but up: more spending, more startups, more ways to profit.
It’s important to remember that, for all that Tesla Inc does, it has always marketed itself as an energy company as much as a car company. Tesla is hoping to grow not just via car sales, but also via renewable energy sources like solar panel roofing.
“The future that we all want is the future where you look around and the roofs are gathering energy and doing something useful,” said Tesla CEO Elon Musk in 2019. (Source: “Tesla’s Next Big Challenge Is Bringing Solar Roofs to Superfans,” Bloomberg BusinessWeek, February 19, 2020.)
The “Solar Roof” is a mix of glass roof tiles and solar energy-collecting tiles that are made at Tesla’s factory in Buffalo, New York.
Already, many of the Tesla faithful are going full steam ahead toward the solar-powered future. And much like with the company’s cars, this is another slow-burn-type affair in which the evangelicals will praise the company while the doubters will continue to be skeptical, until eventually the market makes the final decision.
In the case of electric vehicles, the Tesla believers have been proven correct. I believe it will be the same with the solar panels.
Analysts are beginning to take notice as well, raising TSLA stock’s price target as a result of the company’s better auto sales and renewable energy plays.
But this doesn’t mean Tesla stock will be the only clean energy stock to see gains in the years to come; others will also likely explode.
Smaller startups that are looking to innovate in this space could be highly lucrative for investors, potentially seeing exponential growth as the market matures.
Renewable energy stock initial public offerings (IPOs) will likely grow in number. And as they proliferate, we can expect several of them to be extremely lucrative.
As the industry grows, dominant companies like Tesla will attempt to maintain their hold on the sector, meaning that acquisitions will likely follow in order to stave off competition. In the acquisition scenario, the company being acquired usually sees its share price grow rapidly.
All this is to say we’re witnessing a truly exciting time in the renewable energy sector. For the first time in perhaps its entire history, this sector has the backing and general goodwill of the market. Investors are excited about these companies. And when investors are excited, there’s money to be made.
What Tesla Inc has done is extremely impressive, and it has a larger impact than just making TSLA stockholders happy. The entire renewable energy stock market has been given a stamp of approval from analysts and investors alike.
In other words, this is now a proven industry, with many avenues toward huge share-price growth. As such, we can expect to see a number of new renewable energy stocks pop up in the coming years.
In addition, the U.S. could have a pro-renewable-energy president within a year.
There’s a good chance that we’ll see several “Teslas” emerge in the next few years, with a few of them likely experiencing exponential growth on par with Tesla stock.
The future is bright for this industry, so investors keen on seeing growth for years to come could do far worse than consider clean energy stocks.