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Research Market strategy
by Swissquote Analysts
Live Analysis

Renewable energy manufacturers’ shares rising as prices stabilize

1

Markets remain highly volatile. Geopolitics push consumer sentiment downward although the hope of a return on the negotiation table of both US and China still gives comfort to investors on one side. While on the other, uncertainties surrounding Brexit negotiations, the Italian budget spending plan disagreement with the EU Commission or the collapse of oil prices amid higher US production push the stock market in both extremes – and the Fed rate hiking path is not helping in all this.

For these reasons, it is interesting to notice that in the past year, industrials and utilities have been underperforming on the stock market, a trend that could be at a turning point since the monetary policy normalization phase of major economies is expected to weigh on global growth, which should ultimately affect major stock markets and benefit defensive industries. For instance, the investment in sustainable infrastructure development, which accounts for more than conventional energy sectors, is growing at a faster pace, with electricity generated through renewable solutions such as solar or wind growing from 5% to 12% in a decade. Key contributor to this rapid trend is China, which already reached its 2020 solar energy target of 105 GW, currently estimated along 165 GW and revised upward along 210-270 GW by the end of 2020. The expansion of renewable energy infrastructures is expected to continue in China, the US and the EU, as governments incentivize companies to invest in these evolving technologies (i.e. subsidies). In the first half of 2018, investment in clean energy reached as high as $ 138 billion, with a rise in wind power purchases above 30% ($ 57 billion) due to large investment projects implemented in 2018.

Accordingly, Vestas Wind Systems company a $ 15 billion Denmark-based wind turbine manufacturer company active in Europe, Americas and Asia-Pacific recently benefitted from recent statement regarding the outlook of the industry. Despite missing its Q3 earnings estimates given at EUR 2.81 billion (lowest estimate: EUR 2.84 billion), the company managed to convince shareholders that the brighter outlook starting from Q3 amid stabilizing wind turbine prices and all-time high backlog orders should push the company towards record activity levels in 2019, a good news for renewable energy manufacturers.

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