Steve Cohen (Reuters photo)
2022 was undoubtedly a difficult year for investors. Even accounting for recent gains, all major indexes are still down, and economic uncertainty still hangs over them. Such an environment makes it difficult to find the stocks to pounce on going forward, but one way to understand the current map is to follow the top stock scouts.
Few know the investment game like billionaire Steve Cohen. The hedge fund manager’s company Point72, famous for its high-risk trading style, boasts $25 billion in assets under management, with Cohen’s fortune estimated at $17.5 billion (87th on the world’s richest list).
So, when Cohen makes moves, it’s only natural that investors pay attention. Recently, Cohen named two names, and according to what will be seen next, it turns out that Cohen is not the only one who thinks that these shares are worth investing. According to the analyst consensus, these two companies are rated as strong buys:
The first solar stock that piqued Cohen’s interest was Sunrun, the largest residential solar installer in the US. Since its founding in 2007, the company has focused primarily on a power purchase agreement (PPA) business model, in which it installs and maintains a solar system at the customer’s home before selling electricity to the customer. at an agreed rate for 20 or 25 years.
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The global energy crisis acts as a tailwind. Throughout 2022, Sun-Ran has shown consistent year-over-year growth as evidenced in its recently released fourth quarter results. Customers grew by 21% compared to the same period last year. Revenue rose 40% year-over-year to $609.52 million, beating Street estimates by $20.63 million.
The residential solar market is expected to see a 7% increase in capacity in 2023, but Sun-Ran expects growth of 10% to 15%, although the company warned that financing solar projects has become more expensive due to rising interest rates and this will likely affect profitability. Overall, Steve Cohen has a lot to like here. In the fourth quarter, he bought 871,943 shares, increasing his holding by 103% to a total of 1,723,560. These are now worth almost $38 million.
Echoing Cohen’s approach is Stephen Bird, a Morgan Stanley analyst who called Sun-Ran a “top pick” and thinks the market is not valuing the stock correctly. “RUN currently trades at a market cap of $5.1 billion, however we estimate that its existing customers are worth ~$2.7 billion, or ~53% of the current market cap.”
SolarEdge Technologies (SEDG)
The next stock in the solar field that Cohen targeted is another leader in the field. SolarEdge Technologies is the world’s largest supplier of photovoltaic inverters. In fact, the company was the first to make electricity optimization a commercial success by producing a device that connects to the back of the solar panel through which the amount of power generated increases, thus helping to lower the cost of the energy the system produces.
The company is also reaping the rewards of growing demand in Europe, which now represents nearly 60% of its total volume. In the recently released fourth quarter report, driven by record revenues from the solar sector of $837 million, total revenues reached $890.7 million, representing an increase of 61.4% year over year.
In the fourth quarter, Cohen’s Point72 made a significant purchase of SEDG shares, totaling 268,092 shares, which at the current share price are now worth over $79 million.
The billionaire isn’t the only fan. Guggenheim analyst Joseph Osha is impressed by the gains made in Europe, among other positive developments, and describes SEDG as the ‘best idea’ for 2023.
“It is clear to us that SEDG is the best way to invest in strong residential and commercial solar growth outside the US, and at 28% of inverter volume, the weak US market should not be a problem in our eyes,” Osha concluded.
Most analysts agree with this assessment; SEDG’s Strong Buy consensus view is based on 15 Buys versus 5 Holds. The forecast calls for an increase of 25% per year, considering the average target currently stands at $370.85.
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