Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley analyst Stephen Byrd published his top two ideas in the renewable power sector: solar energy system provider Sunrun Inc. and hydrogen fuel cell developer Plug Power Inc.
“We expect RUN will report ~$7.9k of net subscriber value (when using management’s renewal assumptions), which compares to ~$5.6k of net subscriber value in 2Q21. As a quick refresher, in 2Q21 RUN’s order volume increased 25% Q/Q, however its installs increased just 11% Q/Q. As a result, it recognized a significant amount of creation costs (sales and marketing and capex) related to [systems] that had not yet been placed in service; therefore, the future cash flows from those volumes were not included in subscriber value. However, management expects net subscriber value to be significantly higher in the second half of 2022 … Plug Power: Strong growth in gross billings: We are forecasting a 22% Y/Y increase in gross billings to $151m. PLUG already provided an update to its 2022 and longer-term guidance at its investor day earlier this month, but we believe some clarity could be provided on potential upside to its guidance from its JV with Fortescue and recent acquisition of ACT.”
“@SBarlow_ROB MS’s top 2 ideas in renewable power stocks” – (research excerpt) Twitter
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BMO economist Robert Kavcic detailed which domestic industries are recovering quickest.
“Canadian real GDP sat 1.5% below pre-COVID levels on a monthly basis as of August—we’re almost there! But, note some of the massive holes still lingering at the industry level that make this a very uneven recovery. Most of these are completely obvious to everyone at this stage, such as tourism and entertainment-related industries still down deeply. On the flip side, industries tied to finance, consumer spending and real estate are very strong. There are a few curious areas as well, such as transportation & warehousing— air and rail travel are still deeply negative, even though warehousing and shipping logistics are through the roof (the latter just carry much less weight). For policy, the challenge will be finding the right setting for the economy as a whole. Given that fiscal support will continue to flow directly to the hardest-hit industries, while many interest rate-sensitive areas are sizzling, the BoC can fully justify dialing back the monetary policy accommodation.”
“@SBarlow_ROB BMO: “Industry Holes Remain in Canada”' – (research excerpt) Twitter
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BofA Securities strategist Haim Israel answers the pressing question of who will pick up the tab for global decarbonization.
“A combination of corporate bond issuance, commercial bank balance sheet capacity, government debt, and carbon taxes will likely be required to achieve full decarbonization. It will be challenging to boost funding resources to the $5t trillion a year required to get to net zero emissions, but there is plenty of scope to increase current energy transition related funding of $500bn a year. BNEF estimates that through July 2021, over $3 trillion in labelled bonds and loans have been issued. This includes $623bn in labelled bonds in 2021 (through August), and another $265bn in green and sustainability-linked loans. We expect $1trn in labelled bond issuance in 2021 (including $900bn in green, social and sustainability bonds plus at least $100bn in sustainability-linked bonds). The consumer will also need to contribute, through taxes. Decarbonisation bill of $5tn a year is equivalent to 25% of current global tax revenues ($20tn)”
“@SBarlow_ROB BofA: “Who will pick up the check? [for decarbonization]” – (research excerpt) Twitter
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Newsletter: Bank of Canada “tossing a few more logs on a raging inferno’” – Globe Investor
Diversion: " What Will Drive China to War?” –The Atlantic
Tweet of the Day: “@BIS_org Many economists attribute the secular decline in #InterestRates to slow-moving predictable forces, such as #Demographics and potential #Growth. But whatever caused this downward trend in interest rates was unforeseen bis.org/publ/work974.h… " – Twitter
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