We recently published a list of 7 Most Undervalued Renewable Energy Stocks To Buy Now. In this article, we are going to take a look at where Chevron (NYSE:CVX) stands against the other most undervalued renewable energy stocks to buy now.
Renewable Energy Market to Reach $1.55 Trillion by 2028
The renewable energy industry has emerged as a leading sector globally, with a diverse range of options, including wind, hydropower, biofuel, and solar energy. According to a report by Business Research Company, the global renewable energy market is estimated to be worth $1.10 trillion in 2024 and is projected to grow to $1.55 trillion by 2028 at a CAGR of 8.8%. The sector’s growth can be attributed to increasing environmental concerns and stringent regulations in developed countries, leading to a surge in installed capacity for renewable energy sources. Additionally, the rising power demand and energy consumption have also driven the growth of the renewable energy market.
The U.S. Energy Information Administration (EIA) forecasts renewable energy deployment to grow by 17% in 2024, potentially reaching 42 GW and contributing to nearly a quarter of the nation’s electricity generation. However, this growth may be accompanied by a temporary increase in renewable energy costs due to high financing, labor, and land expenses. Despite this, tax credits from the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) are likely to keep solar and wind energy competitive. The solar and storage markets are expected to expand further, driven by tax incentives and government support, particularly through programs like the DOE’s Loans Program Office. On the other hand, the wind and hydrogen energy sectors may face challenges. Wind energy is experiencing higher deployment costs and delays in obtaining approvals, while hydrogen energy struggles due to a lack of government incentive programs to support its development.
Inflation Reduction Act Has Made U.S. a Leader in Renewable Energy
In an interview on September 24, U.S. Energy Secretary Jennifer Granholm highlighted the success of the Inflation Reduction Act, which has made the U.S. an attractive destination for renewable energy developers and manufacturers. Since the passage of the act, over 800 factories have announced plans to come to the U.S. or expand their operations in the country, creating over 400,000 jobs in the renewable energy sector. Granholm attributed this growth to the public-private partnership created by the President’s Invest in America agenda, which has led to a record $500 billion worth of investment in the renewable energy space.
Granholm said that everyone is closely watching the current tensions in the Middle East and that the potential for a wider regional escalation is a concern. However, Granholm emphasized that the U.S. has been investing in renewable energy and has seen record amounts of oil, gas, and renewable energy production, making the country less vulnerable to global energy disruptions.
Granholm noted that there is bipartisan support for the renewable energy initiatives, with 18 Republicans signing a letter urging against rolling back the policies. She also pointed out that the investment in renewable energy is not just a Democratic or Republican issue, but a national imperative, and that undoing the progress made so far would be “political malpractice.”
Granholm also discussed the growing need for power due to the growth of data centers and generative AI, which is estimated to increase power demand by 15% within the next ten years. She emphasized that the U.S. is adding record amounts of renewable power to the grid and that the hyperscalers for big data centers are committed to using renewable energy. Granholm also highlighted the potential for small nuclear modular reactors to play a role in meeting the growing power demand, particularly in partnership with data centers.
As the world continues to grapple with the challenges of climate change, the growth of the renewable energy market is a sought-after development. Governments around the world implementing policies to support the transition to low-carbon energy, and the renewable energy industry is poised for significant growth in the coming years.
Our Methodology
For this article, we scanned Clean Energy ETFs plus online rankings to compile an initial list of 30 renewable energy stocks. From that list, we screened for companies that are trading at a forward P/E ratio of under 20 as of October 6. From that list, we narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of an oil rig at sea, the sun glinting off its structure.
Chevron (NYSE:CVX)
Number of Hedge Fund Investors: 64
Forward P/E Ratio as of October 6: 13.83
Chevron (NYSE:CVX) is a leading global player in oil and gas exploration, production, and refining, with a diversified portfolio that also includes investments in renewable energy technologies and services. The company is actively developing its renewable energy capabilities, with notable projects including a 16.5 MW wind farm in Wyoming that powers 13,000 homes annually and a 49 MW geothermal facility in California that supplies energy to 40,000 homes each year. Additionally, Chevron (NYSE:CVX) offers renewable diesel blends containing 6-20% renewable content at its California terminals, sourced from materials such as vegetable oils and animal fats.
In a significant breakthrough, Chevron (NYSE:CVX) successfully ran a gas turbine on a 60% hydrogen fuel blend for several days in May. The turbine, located near the company’s Pipeline & Power Business Unit facility in California, provides power and steam for nearby oil fields. This achievement has important implications for reducing carbon emissions in industrial processes, such as manufacturing and data centers, and could accelerate the adoption of hydrogen technologies.
Chevron’s (NYSE:CVX) stock is trading 13.83 times this year’s earnings estimate, With a consensus Buy rating from industry analysts, the stock has a target price of $169.39, which represents an 11.65% upside potential from its current level. As of the second quarter, the company’s stock is held by 66 hedge funds with a total value of $122.40 billion.
Overall CVX ranks 2nd on our list of most undervalued renewable energy stocks to buy now. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.