Renewable energy stocks are lately generating quite a lot of excitement in the global stock market. One of the primary reasons for this is the growing concern over climate change and a shortage of fossil fuels.
In such a scenario, two companies that are emerging as big players are Brookfield Renewable Partners LP (TSX: BEP.UN) and Tesla (NASDAQ: TSLA). These two growth stocks are miles apart in terms of current valuations ($18 billion and $745 billion, respectively). So, the above-mentioned question may seem a little silly, considering the current dynamics of the market and the rather divergent businesses these two companies are involved in.
With that said, let’s dive in.
Brookfield Renewable stock averages an impressive return
Brookfield Renewable Partners LP provides renewable power generation facilities in countries of North America, Brazil, Columbia, Europe, and Asia. This company utilizes solar, wind, hydro-electric, and biomass power to generate, store, and distribute electricity.
In the clean energy sector, Brookfield Renewable boasts a strong and diversified portfolio. With organic growth and acquisition, BEP aims to grow its returns by 12% to 15% per year. To achieve it, this company has laid a major focus on its hydro-electricity generation segment. After it formed a partnership with Cameco for Uranium Power, its stock has also witnessed significant growth.
Before these achievements, Brookfield Renewable has faced certain headwinds. Up until early 2021, the share price for this company was US$70 per share. However, these prices witnessed a drop making the present price half of what it previously was.
Factors like higher interest rate hikes and inflation knocked down the BEP stock price several times in previous years. Today, analysts state that BEP’s price is still below fair value. In November 2023, Brookfield Renewable Partners stock rallied by 18.2%. As of December 27, 2023, the stock has risen by 6.3% from last month.
As the world is facing a major shift from conventional to renewable energy sources, things might continue to look up for this company.
Tesla also put up some impressive numbers
Formally known as Tesla Motors, Tesla Inc. was incorporated in 2003. This company designs, engineers, manufactures, leases, and sells electric vehicles. It also focuses on energy generation and storage systems in the United States, China, and other countries globally.
Tesla functions with two segments, energy generation and storage, and automotive. The former segment looks into the designing, manufacturing, installation, leasing, and sale of electricity generation and storage products to a diverse customer portfolio. This includes residential and industrial customers.
In the electric vehicle segment, Tesla manufactured around 495,000 vehicles and delivered around 484,000 vehicles for Q4 FY2023. During this period, production of these vehicles also grew by 35%. TSLA stock has also doubled in 2023. This leads analysts to anticipate a prosperous 2024 and beyond for Tesla in the electric vehicle sector.
Bottom line
Both companies are likely to remain the focus of eco-conscious growth investors focused on electrification and renewable energy. And while Tesla’s current valuation may be overdone, and one could argue Brookfield Renewable may be undervalued, this valuation gap is unlikely to close by 2030.
I’m of the view that Brookfield Renewable may be the more stable and smart bet in this current environment (given Tesla’s valuation concerns), but given how indexes are constructed in this day and age, and Tesla’s size and ties to numerous other businesses, it’s hard to bet against the champion right now.
