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Investors should take advantage of recent weakness to buy select stocks in the clean tech and renewable energy space, including NextEra Energy (NYSE:NEE), Morgan Stanley analysts said Tuesday, as the bank re-evaluates implications for clean energy in various election outcomes.
Analysts led by Andrew Percoco see full-scale repeal of the Inflation Reduction Act as unlikely even in a Republican sweep, but trimming or partial repeal is possible, with a key focus on electric vehicle tax credits and direct pay.
Morgan Stanley sees domestic manufacturing, nuclear power, and wind and solar tax credits enjoying bipartisan support, reducing the risk of repeal regardless of administration composition, with no change to the IRA or the pace of clean energy development under a unified Democratic government or a divided government with a Democratic president.
The bank expects no changes in its outlook for the pace of data center buildout in the U.S., the nuclear production tax credit, or the potential for data centers to collocate with nuclear plants regardless of the presidential administration, which should bode well for Constellation Energy (CEG) and Vistra (VST).
“Demand for renewables is a powerful force,” Morgan Stanley says, believing new sources of demand can outweigh the risk of changes to wind, solar and storage tax credits, saying it would be buyers of AES Corp. (AES), First Solar (FSLR) and NextEra Energy (NEE) after recent underperformance.
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