The past few years brought a great deal of excitement for green energy stocks and the renewable energy space overall.
A flood of government investments and subsidies in the sector helped build investor interest. Meanwhile overseas disruptions, such as Russia’s invasion of Ukraine, placed traditional fossil fuel power sources at risk. That helped further prioritize green power solutions.
However, that momentum has now gone into reverse. Green power stocks have slumped over the past 18 months as government subsidies have started to abate. Oil and natural gas prices have dropped back dramatically from the 2022 highs. And investors are placing more emphasis on things such as profits and cash flows rather than revenue growth or technological potential.
These factors make it a great time to sell these three struggling green power stocks.
Plug Power (PLUG)
It’s time for traders to stop giving Plug Power (NASDAQ:PLUG) more chances. The struggling hydrogen power firm has been in business since the 1990s. Despite having many chances to prove itself, the hydrogen fuel cell company seems farther away from profitability than ever.
PLUG stock has plunged more than 99% from its all-time highs. Despite a steady stream of press releases and new developments, little of it ever seems to amount to profitable business expansion. In fact, Plug Power has lost money each of the past ten years. Recently, the results have worsened. Plug Power lost more than $1 billion in 2023, and losses are continuing to mount in 2024.
Plug Power stock soared in 2021, despite a lack of profitability, as traders bid up all sorts of speculative green energy companies. Once again, however, Plug Power was unable to cash in on the opportunity, and the gains have disappeared.
While Plug Power’s hydrogen product offerings may have seemed innovative or promising many years ago, the technology simply hasn’t caught on commercially. Traders should refocus their attention on more promising green power solutions.
ChargePoint Holdings (CHPT)
ChargePoint Holdings (NYSE:CHPT) is a company seeking to power up the electric vehicle landscape.
Investors once gravitated to EV charging companies as a clear “picks and shovels” beneficiary of the broader industry trend. As EVs gain market share, chargers should become increasingly valuable infrastructure for the 21st century in the same way that gas stations were a great business in prior decades.
While the underlying thesis is logical and sound, it’s far from assured that independent players like ChargePoint will be the ultimate winners. EV manufacturers such as Tesla (NASDAQ:TSLA) have already built out large charging networks. And existing large energy companies such as BP (NYSE:BP) have invested heavily in charging infrastructure as well, with it having deployed more than 29,000 EV charging stations already.
All this to say that while EV charging is compelling, ChargePoint seems unlikely to be the eventual champion here. In fact, ChargePoint’s Q4 earnings results were dismal. Revenues plunged 24% year-over-year. The firm’s adjusted EBITDA loss widened. And worst of all, ChargePoint guided to just $105 million in midpoint Q1 revenues, compared to street estimates of $127 million.
Traders may look at the sub-$2 stock price and think shares are a worthy speculation. But don’t let the penny stock status fool you. Due to large amounts of dilution used to fund the buildout of the charging network, ChargePoint still has a market capitalization of more than $750 million. That’s a huge number for a small business with shrinking revenues and large operating losses.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) is a solar power company. Its core technology revolves around semiconductor-based microinverters which can convert energy at the individual solar module level. It has layered on a series of other energy generation, management and storage solutions on top of that technology, allowing it to offer consumers an all-in-one solar power platform.
ENPH stock soared from less than $10 per share in 2019 to a peak of nearly $350 in 2022. There was a great deal of excitement around President Biden’s Inflation Reduction Act, which authorized a huge amount of spending on projects to fight climate change and improve environmental resiliency.
Included in that Act were funds for measures such as loans and grants to help foster the development of utility-scale solar photovoltaic projects. Various U.S. states also offered significant subsidies for rooftop solar installations, giving a further boost to the overall industry.
Most of those positive tailwinds dissipated in 2023. Subsidies have started to run down, rooftop solar companies are in crisis, and people are dialing back solar power investments more broadly given high interest rates and economic uncertainty.
All this is leading to a massive decline in Enphase’s forward prospects. The company generated $2.3 billion in revenues in 2023. Analysts see that slipping to just $1.5 billion this year. And the stock is going for more than 40 times forward earnings. With no certainty as to when subsidies will pick back up (especially given the upcoming presidential election this year), Enphase could be in for a long night before the sun rises once again.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.