Tesla (TSLA 2.51%) is down more than 20% from its all-time high stock price hit at the end of August and there could be further downside ahead. Shares were bid up so far, so fast that even a small change in investor sentiment or perceived underperformance could crater shares. And with a company like Tesla that's losing money and facing more and more competition every year, there's no telling when we'll see a bull run like 2020's again.
If you're not willing to pay the premium Tesla stock commands, there are still some great options in renewable energy stocks. Three of our contributors think Blink Charging (BLNK 3.76%), Nikola (NKLA 1.30%), and Clearway Energy (CWEN.A) (CWEN -1.99%) are the top picks to outperform Tesla stock in the long term.
Charging into a renewable energy future
Travis Hoium (Blink Charging): Tesla is clearly leading the way in selling electric vehicles, but that's attracting a lot of attention from auto manufacturers. Nikola, General Motors (GM -0.94%), Volkswagen, Rivian, and BMW are just a few of the manufacturers expanding electric-vehicle production over the next few years, and all of those vehicles will need to be charged. That's where Blink Charging comes in.
The company designs, owns, and operates EV charging stations across the country. It sells electricity to drivers with simple pricing at convenient locations across the country. That's helped drive a 120% increase in revenue in the second quarter of 2020 to $1.6 million. In the first half of the year, revenue was up 122% to $2.9 million.
Blink Charging isn't yet profitable, with net losses of $3 million last quarter and $6 million for the first half of the year, but that shouldn't be its focus right now. Growing the top line and expanding the network is the key right now and as more EVs hit the market and charger utilization increases, the bottom line will improve.
Partnerships are going to be a key for the company. This summer, it made a deal with Nissan and a local telecom in Greece to build charging stations. And being included in the new Apple Maps app as part of its EV charger routing was a big step this fall. But to continue growing it'll need to add more manufacturing partnerships to expand the network further.
I'm encouraged by Blink Charging's growth, and as EVs become more common the addressable market should continue to grow. Right now, it looks like Tesla is going to be the only manufacturer building a large charging network on its own, so other brands will need to leverage a different charging network. Blink Charging is a great option, and if OEM partnerships emerge, this could be a home run stock.
A big deal
Howard Smith (Nikola): Since Nikola started trading in June 2020, the stock has been richly valued. By some metrics, investors were originally valuing it higher than they did Tesla at a similar point in its life cycle.
While that might have seemed way overpriced for a company that doesn't even have a manufacturing facility yet, Nikola has now done something that Tesla never did. And its future value now looks to have more upside, while Tesla investors may have to ride its shares back down to reality.
Nikola and General Motors announced a partnership that will help drive the future of the start-up. In its announcement, Nikola said its core business was semitruck battery electric vehicles (BEV) and hydrogen fuel cell electric vehicles (FCEV), to be in production in 2022 and 2023, respectively.
It also has plans for its Badger pickup truck to be available as a BEV or FCEV, and said it was planning a network of 700 hydrogen fueling stations throughout North America. Its market capitalization valued the company at almost $30 billion in June, without even a factory for production in place.
While that valuation has been almost cut in half since then, investors were still just buying on hope. But after announcing its new partnership with GM, that hope has much more of a path to reality. GM will be investing $2 billion for an 11% stake in Nikola. GM will engineer, build, and certify the quality of the Badger pickup truck as both a BEV and FCEV.
The impacts of this deal are many. GM's pedigree lends authenticity and reality to Nikola's plans. And Nikola says it will save $4 billion in battery and powertrain costs over 10 years. GM will supply the batteries and fuel cells for the Badger, and will also be the exclusive fuel cell supplier for Nikola's semitrucks outside of Europe. Nikola's stock surged over 40% on the news, though it has retreated back some from those levels.
With a more than 300% gain year to date, Tesla investors have driven its share price to unsustainable levels, given the fundamentals. Buyers are speculating on more than just Tesla's electric vehicles. While its battery and solar businesses might eventually warrant a higher share price, its recent 30% drop should remind investors that its lofty valuation was built on long-term speculation.
With its GM deal, Nikola is now positioned to see its valuation grow over the long term. For now it seems those two stocks are headed in different directions, at least until more fundamental value is created. Nikola created just that by partnering with GM.
A clear path to market-beating returns
Jason Hall (Clearway Energy): It was a tough year or so for Clearway investors, as the company's biggest customer, PG&E, went through a bankruptcy that tied up a lot of cash it owed to Clearway.
This forced Clearway to slash its dividend almost 40% in 2018, and shares plummeted more than 30% shortly thereafter. Investors were worried that what management was saying -- the cash would get released and the benefits of future cash flows would recover -- wouldn't prove true, and the PG&E bankruptcy would cause permanent harm.
Over the past year or so, investors started to come around as the business improved, and the quality of Clearway's renewable energy generation assets proved out. The company was able to issue a couple of dividend increases, and the likelihood of a full recovery became more apparent. The culmination of those expectations came in early August, when Clearway announced a monster 49% dividend increase.
Yet since then, investors have sold off, and shares are down about 12%. That's created an excellent opportunity to buy this leader in wind and solar power production, which can make money across any economic environment, and which benefits from the technology race Tesla and other solar and energy storage manufacturers are constantly engaged in.
Today, Clearway investors can earn a strong 5.2% dividend yield, and reasonably expect the payout to grow 5% or more every year for many years to come. While Tesla remains priced for perfection, Clearway is a bargain with incredible prospects that will pay patient investors to sit back and watch the growth.
Putting renewable energy to work for you
Tesla is now more valuable than most of the other publicly traded automakers combined. That's a wild valuation that will be difficult to live up to in the long run.
We think the odds are better with some smaller companies like Blink Charging, Nikola, and Clearway Energy. They're built for long-term growth, and with Tesla coming down to earth, now is the time to buy these renewable energy stocks.