Cathie Wood should love these energy storage names even more than Tesla
Energy storage has long been an industry with great potential as the cost of batteries and other technologies drop rapidly and new intermittent sources of electricity such as wind and solar proliferate on the grid. But it’s only recently that energy storage has become financially viable for everyone from homeowners to utilities.
As this industry evolves, there are multiple ways to invest in this growing segment of renewable energy stocks, including with a company like You’re here (NASDAQ: TSLA). But Tesla only derives a small percentage of its revenue from energy storage, and there may be better ways to invest in growing the industry.
As an early investor in innovative technologies, including energy storage, ARK Invest CEO Cathie Wood sees Tesla as one of the top holdings in her portfolio. ETF Innovation ARK. But three Fool.com contributors think Flowering energy (NYSE: BE), Enphase Energy (NASDAQ: ENPH), and Lucid Engines (NASDAQ: LCID) are still better energy storage buys for investors than Tesla.
The fuel cell leader
Travis Hoium (Bloom Energy): Most energy storage companies today are focusing on battery storage, but there is a huge long term opportunity in what is called long lasting energy storage. This is the storage of energy for days, weeks or months, not the normal short-term storage provided by batteries. And long-term storage requires different technology than batteries. This is why the hydrogen company Bloom Energy is so attractive in this space.
Bloom Energy manufactures what is called a solid oxide fuel cell, which uses a solid ceramic material as an electrolyte. This is less expensive than competing proton exchange membrane fuel cells for large energy storage applications for commercial buildings, utilities or even the shipping industry.
Management believes the total market opportunity for Bloom Energy’s technology is over $ 2 trillion, of which $ 300 billion is for hydrogen alone. And you can see below that the company is already generating more revenue and a better gross margin than its biggest fuel cell competitors.
Like most energy storage companies, Bloom Energy remains a speculative and risky investment. But the company has the potential to disrupt energy storage with hydrogen-based products and even enter new markets like shipping, trucking and large-scale long-term storage. These could open up huge markets and with cutting edge operations, and I think that’s the best bet on energy storage today.
Storage is a new part of this solar system
Howard Smith (Enphase Energy): An investor who loves Tesla should be comfortable owning a growing business that is priced rich by potential rather than current business fundamentals. If it is the energy storage portion of the business that is generating this interest, Enphase Energy is another fast growing company with a rich valuation that only increases the battery storage system portion of its business.
Enphase manufactures solar system microinverters, the components that convert solar panel energy from direct current to alternating current used in the home or business, as well as associated software and other system technologies. She has increased her income by 250% on a rolling 12 month basis over the past three years. Because these are the early stages of expanding what is expected to be a rapidly growing solar energy market, investors have jumped into the action, resulting in gains far exceeding revenue growth. of the company. Stocks have climbed more than 3,200% over the same period.
The company added scalable battery storage systems to its offerings in June 2020. A year later, Enphase expanded the product internationally, starting with the systems launch in Germany. Battery storage fits into the entire Enphase solar system. Updates and new features are added online, and owners can use the app to control charging to save battery life. It also tracks the general state of the system, including the amount of energy produced by the solar panels, as well as the failure of this consumed, returned to the grid or to charge the storage battery.
Having everything integrated into one system simplifies the offer to the home or business owner. Storage is only expected to improve Enphase’s business results in the future. And business has already recovered from a downturn linked to the pandemic. In its second quarter earnings report, Enphase provided guidance for the current quarter that involves 93% revenue growth from the third quarter hit by last year’s pandemic. And those results would mean a sequential increase of 9% from Q2 2021 revenue at the midpoint of the outlook.
Like Tesla, Enphase’s stock is trading at a level that anticipates the growth discussed above. According to data from YCharts, stocks are trading at a futures price-to-earnings ratio of 80 and a price-to-sell ratio of around 21. It’s expensive, but as solar production continues to expand, Enphase is on the move. good position. with a fully integrated system for homes and businesses to continue to accelerate growth.
A new way to play in the EV space
Daniel Foelber (Lucid Engines): The burgeoning electric vehicle company Lucid Motors gets most of its attention from its Lucid Air sedan. But the company also has an interesting storage activity which could bring significant results in the medium and long term.
Energy Storage Systems, or ESS, is expected to become one of the three divisions. It is still in its infancy, but ESS will target residential, commercial and utility customers primarily through the sale of battery packs and battery management systems.
In his July presentation, Lucid informed investors about the construction of a solar farm on the roof of its headquarters to test its alpha energy storage prototype. The next step is a larger pilot project focused on installing a similar solar system at the company’s manufacturing facility (AMP-1) in Casa Grande, Arizona. The ESS division is young, but it’s worth remembering that the company’s roots lie in battery storage technology. This competitive advantage and experience is the main reason Lucid was able to produce a car with such impressive specifications.
The more expensive of the four versions, the Lucid Air Dream Edition, is expected to begin mass production and deliveries to customers before the end of the year. Its specs were put to the test last week when Motor trendJonny Lieberman’s test drove the 2022 Lucid Air Dream Edition R from Los Angeles to San Francisco, with Lucid CEO Peter Rawlinson behind him. The rave reviews from Lieberman indicated that Lucid has, indeed, built a phenomenal car.
Lucid has proven her technological prowess, but production and supply chain efficiency are two entirely different skills that she has yet to demonstrate. However, Lucid has the potential to become a groundbreaking competitor to Tesla in energy storage and luxury electric vehicles. It’s right down the aisle of Cathie Wood, making Lucid a high-risk, high-yield growth stock that deserves to be considered right now.
Energy storage has a bright future
Energy storage will become more and more valuable over the next decade as intermittent energy sources come online, backup power becomes more valuable and consumers will want to consume them. themselves more of their energy. These will all be good winds for the industry and we believe Bloom Energy, Enphase Energy and Lucid Motors could be big winners in the space.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.