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Why CBAK Energy, Plug Power, and Enphase Energy Stocks Popped Friday

By Rich Smith - Nov 27, 2020 at 12:46PM

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The trading week is winding down -- but the renewable energy deals may be just beginning.

What happened

It's a lazy Friday on the stock markets, as traders sluggishly recover from their tryptophan-induced stupor to place a few last orders before the post-holiday weekend. Even rapidly rising renewable energy stocks are finding it harder to maintain much momentum. Shares of Plug Power ( PLUG -8.81% ) and Enphase Energy ( ENPH -7.72% ) -- up 6.2% and 7.1%, respectively, in early trading -- are now just hanging on to gains of 2.2% and 3.5% (as of 10:45 a.m. EST).

One other alternative energy stock, however, is showing quite a bit more pep: CBAK Energy Technology ( CBAT -7.71% ), up 16.6% on news of a potentially huge deal with Chinese electric car-maker Kandi Technologies ( KNDI -8.99% ).

Three colorful arrows racing straight up on a black background.

Image source: Getty Images.

So what

Shares of Plug Power have soared 730% year to date, and Enphase Energy stock is up an almost-as-unimaginable 545%. By this point investors may be wondering if there's any more room to run. But what we're seeing at CBAK Energy -- up 633% so far this year -- suggests this rally might still have legs.

This morning, CBAK announced a "strategic cooperation partnership" whereby it will collaborate with Kandi Technologies to design a brand-new "pure electric vehicle." One key aspect of the deal: Kandi will buy approximately $120 million worth of battery pack systems from CBAK in 2021.

Now what

Investors seem to be interpreting this deal as better news for CBAK Energy (shares up 16%-plus on the news) than for Kandi (shares down 3%) -- and that may be true. After all, CBAK is the smaller partner in this "strategic partnership," with a market capitalization only half that of Kandi and accordingly more room to grow. CBAK sold less than $27 million worth of batteries over the last 12 months, according to data from S&P Global Market Intelligence. Today's partnership announcement appears to guarantee that CBAK will grow those sales more than fourfold over the course of the next year.

This prospect alone probably explains why CBAK shares are doing so well today. More broadly, though, investors on Plug and Enphase -- and elsewhere in the renewable energy space -- may also be thinking that today's announcement heralds the beginning of more partnerships, combinations, and (dare we hope?) maybe even mergers and acquisitions in the renewable energy ecosphere.

If that's the case, CBAK's run today may be the last big price spike of the week...and also the first of many similar price spikes to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Enphase Energy, Inc. Stock Quote
Enphase Energy, Inc.
$216.85 (-7.72%) $-18.15
Plug Power Inc. Stock Quote
Plug Power Inc.
$33.21 (-8.81%) $-3.21
Kandi Technologies Group, Inc. Stock Quote
Kandi Technologies Group, Inc.
$3.34 (-8.99%) $0.33
CBAK Energy Technology, Inc. Stock Quote
CBAK Energy Technology, Inc.
$1.74 (-7.71%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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