Eoin Treacy's view -
After dropping by nearly a third this year, Vestas Wind Systems has warned that more pain lies ahead, amid surging commodity prices and supply-chain bottlenecks that disrupted production. But the cost of raw materials is not the only reason blamed for the lackluster returns.
In a way, green stocks are paying the price of past success, as a rally in 2019 and 2020 catapulted their valuations into the stratosphere. Now, much of the good news on government pledges to pivot their economies toward a low-carbon model is already priced in.
Even after this year’s share price plunge, Siemens Gamesa trades at 52 times its expected earnings for next year, and Vestas at 45 times. That compares to 15.7 times for the Stoxx 600.
While equity strategists from BlackRock Inc. to Goldman Sachs Group Inc. and Societe Generale have said that decarbonization presents unprecedented opportunities to investors, near term headwinds remain.
Valuations for “green stocks are still elevated,” Bloomberg Intelligence strategists Tim Craighead and Laurent Douillet said in a note. “Lower sales expectations and higher steel prices pressure wind-turbine profits.”
Devon Energy and Marathon Oil are the top two best performing stocks on the S&P500 this year. Sentiment towards the energy sector has improved considerably among the investment community this year because of this performance.
This section continues in the Subscriber's Area. Back to top