Company Name: Brookfield Renewable
Entry Price: $52
Target Price: $64
Projected Yield: 23%
Time Line: 3 to 6 months
About Brookfield Renewable
Brookfield Renewable is one of the global leaders in renewable energy production. The company's portfolio includes wind, solar, and hydropower facilities, with a total capacity of 19,300 MW. It has over 5,300 generating facilities in Americas, Europe and Asia.
What's the Idea?
Capitalize on a stock that may grow with the global interest in renewable energy, its support by the US Democrats, and the company's competitive edge in the market.
Buy Brookfield Renewable Shares >>
Why Trade Brookfield Renewable?
Reason 1: Portfolio Expansion with a Focus on Solar Energy
Brookfield Renewable became one of the largest players in the renewable energy sector, when it acquired TerraForm business in July 2020, which boosted the value of the company's assets to over $52B. Despite the crisis, Brookfield Renewable is planning to continue expanding its own asset portfolio. Solar energy has the smallest share in Brookfield Renewable portfolio (9%), but plays an important role in increasing dividends. Solar panels can generate electricity at a predictable cost for 25 years, which creates an opportunity for a stable cash flow.
In July 2020, the company announced its acquisition of a 1,200 MW solar power plant in Brazil, investing $200 million into this world's largest solar plant. The plant is to start operating in 2023, with 75% of its capacity already sold. The project will generate a steady cash flow, so the company aims to obtain a 100% stake. Besides, last year, Brookfield Renewable announced its intention to acquire 14 solar projects in Brazil. In the coming years, these projects will start generating profits, which should ensure the company's business sustainability.
Reason 2: Green Energy Being Supported by the Democrats
The stock price rose in September, one of the reasons being that Joe Biden was ahead in the election race. Biden is considered more loyal towards renewable energy than the current US President, Donald Trump. If the Democrats' candidate wins, the green energy may be further stimulated. Brookfield Renewable, which generates 63% of all its energy in North America, may well benefit from this.
Reason 3: Huge Market Potential
Renewable energy is becoming popular, especially due to the anti global warming hype. The economic uncertainty around the COVID-19 outbreak has minimum impact on Brookfield Renewable, as people need energy in any case, lockdown or no lockdown.
Whatever the US elections outcome, solar and wind energy will remain a popular source in the coming decades. There is a long term trend towards increasing demand for green energy, as only renewable energy can provide predictable electricity prices over a 20-year period. Many countries are keen on reducing carbon emissions, which stimulates them to switch to the renewable energy production. Solar and wind energy production prices have dropped significantly, making these energy sources more attractive than traditional fossil ones, and this trend is likely to become more popular over time.
According to the International Energy Agency (IEA), the renewables reached 25% of the world's electricity generation capacity in 2018; this may rise by an additional 50% until 2024. At the same time, the IEA says the market may grow faster, in case there is more government support and financial incentives.
Reason 4: Competitive Edge in the Market
With such industry growth potential, Brookfield is ready to expand its annual investment spending to $800M-$1B per year. The funds will be used to finance projects under development, which will potentially produce 18 GW. This is almost comparable to the the company's current operating portfolio output of 19.30 GW. This makes the company the largest player in the industry with planned expansion projects, most of those being related to solar energy.
In addition, the company has a solid balance sheet (the ratio of consolidated debt to capitalization is 35%) and a sufficient level of liquidity, which is $ 3.40B. In the next 5 years, the company doesn't have any loan repayments, while the average interest rate is 5.20%. This provides the company with an opportunity to continue expanding its asset portfolio.
Brookfield is performing well despite the pandemic: in the first six months of 2020, the consolidated adjusted EBITDA was at $1.135B, just 11% down compared to last year, while the operations value increased by 11.30% to reach $453M, and the year-to-date dividend payments amounted to $1.09 per share.
Maintaining the current financial position and further expanding its presence in the industry may have a stimulating effect on Brookfield Renewable stock price.
How to Use the Idea
- Buy Brookfield Renewable stock at $52.
- Allocate no more than 3% of your portfolio amount. To build a balanced portfolio, you can use our analysts' recommendations for an USD or a EUR portfolio.
- Sell the stock when the price is at $64 per share.
How to Buy Brookfield Renewable Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type BEP.US (Brookfield Renewable ticker in the NYSE) in the search box, and select Brookfield Renewable Partners LP in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type BEP.US (Brookfield Renewable ticker in the NYSE), and select Brookfield Renewable Partners LP in the results. You will then see Brookfield Renewable stock in the market watch; tap it and go to the Order tab in the dialog that will show up. Specify the number of shares you want to buy and click Buy.
Buy Brookfield Renewable shares: take advantage of the global interest in green energy!
Buy Brookfield Renewable Shares >>
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