The burgeoning initiatives by governments worldwide to address climate change have over the past year boosted investors’ optimism about the clean energy industry’s growth prospects. This has helped the prices of many stocks skyrocket. But while the industry has witnessed decent growth, its short-term growth prospects look bleak because most countries are currently focusing on their economic revival from the 2020 recession at the expense of many other considerations. Hence, we think overvalued clean energy stocks NextEra (NEE), Plug Power (NASDAQ:PLUG), and Enphase (ENPH) are best avoided now. Read on.Growing concerns about global warming have compelled many countries to set sustainability goals and implement initiatives to achieve carbon neutrality over the next few decades. However, as many countries focus now on their economic revival from last year's pandemic-led recession, climate change actions are to a degree on hold.
Though most of the developed countries plan to curb carbon emissions over the next several decades, only a handful of policies dedicated toward climate change have been passed into law globally. For example, even negotiations regarding President Biden’s proposed $2.3 trillion infrastructure package, which contains many climate change elements, have come to a halt in the U.S. Senate for now after Senate Republicans delivered a $928 billion counter offer to Biden’s proposal.
Given this backdrop, renewable stocks NextEra Energy, Inc. (NYSE:NEE), Plug Power, Inc. (PLUG), and Enphase Energy, Inc. (NASDAQ:ENPH), prices for which skyrocketed over the past year on investor optimism, look extremely overvalued at their current levels. So, we think these stocks are best avoided now.