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Why Renewable Energy Stocks Popped and Dropped on Friday

By Travis Hoium – Oct 23, 2020 at 4:57PM

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It was another wild day for the industry, and it's not ending the week well.

What happened 

Shares of renewable energy stocks had a wild trading day on Friday as the market tried to process a number of news items. Bloom Energy (BE 0.93%) jumped 5.8% early in the day before dropping 3.8% at its low, Enphase Energy (ENPH 1.00%) was up 5.6% before falling 2.7% midday, and JinkoSolar (JKS -0.60%) was up 6.1% before dropping as much as 12.7%. 

The volatile trading comes as shares of renewable energy stocks have had an up-and-down week. But overall, shares of the industry are rising as investors take a more positive view of it. 

Solar panels with a wind turbine in the background on a sunny day

Image source: Getty Images.

So what

The first event of note that could have driven shares early in the day was last night's presidential debate, during which former Vice President Joe Biden discussed his renewable energy plans. If the Democratic candidate does become president next year, the speculation is that renewable energy will be a top priority and companies like Bloom Energy, Enphase, and JinkoSolar will be beneficiaries of more positive policies. 

Another big news item driving the market today was the hot-and-cold progress on stimulus talks. Talks between House Speaker Nancy Pelosi and the White House continue, and there was some optimism a deal was near early in the day. But those hopes have faded, and so has the market and renewable energy stocks.

Without a stimulus deal, oil took a nosedive late in the morning and is currently down 2.3%. Renewable energy stocks often trade along with oil on a short-term basis, so it's no surprise that these stocks fell as oil was falling. Another thing to keep in mind is that renewable energy stocks are typically more volatile than the market overall. 

Now what

There's a lot of news that seems to be moving renewable energy stocks, but long term it's mostly noise for investors. The renewable energy industry has been lowering costs and becoming more competitive with fossil fuels for more than a decade, and a stimulus package or even a new president isn't going to change that. 

I would put more emphasis on the earnings season that's about to begin for renewable energy companies. They're coming off a surprisingly good second quarter, and investors will be looking for continued momentum and better margins as demand has seemed to pick up once the pandemic lockdowns ended. Fundamentals is ultimately what will drive the industry forward, not the presidential election or a stimulus package. 

Travis Hoium owns shares of Bloom Energy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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