Growth stocks haven’t been in vogue this year. Amid soaring inflation and rising interest rates, growth stocks have looked increasingly risky and have been on a downward track. However, today, I’m looking at three companies that could see their share prices sore as clean energy takes off.
Ceres Power
Ceres Power (LSE:CWR) is an early-stage hydrogen technology business. The British fuel cell and electrochemical technology firm has yet to turn a profit, and it could be some time before it does. It’s certainly not cheap by the price-to-sales metric either. The firm has a P/S ratio of around 45, which is pretty high. And that’s definitely one issue for me as a potential buyer.
However, it’s clear that there’s huge potential in hydrogen technology, which is widely forecast to rival electric battery technology to power cars in the future. Fuel cells wouldn’t only be used in cars, but everything from powering homes to supporting massive cloud data centres.
Its top-selling product is SteelCell, a highly efficient, fuel agnostic, and scalable fuel cell made from widely available materials. It also has lucrative partnerships with Bosch and Doosan Fuel Cell.
NIO
NIO (NASDAQ:NIO) is my top electric vehicle (EV) stock pick. The firm is not yet profitable, and it’s not expecting to be for two years, but it has a really impressive offer in the sector and has demonstrated impressive revenue growth. It trades with a P/S ratio of four, which is considerably less than other EV manufacturers.
One thing I particularly like about NIO is its swappable battery technology. Drivers can pull up at a garage and exchange their near-empty battery for a full one in a matter of minutes. I think this gives it a huge advantage over its competitors. Especially compared to Tesla, which trades with very high multiples.
While Covid-19 restrictions were relaxed in China today, there’s definitely concern that this Chinese EV maker could see its growth hampered by future lockdowns. China’s Covid-zero policy is likely to damage NIO’s production and, if sustained, could hamper economic growth and demand for its high-end vehicles.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (NYSE:TSM) is a giant of the semiconductor world and stands to benefit from the EV revolution. The Hsinchu-based company is the world’s largest manufacturer of semiconductors by market share and has lofty plans for future growth. Moreover, it’s still growing. The firm expects sales to rise 25-29% in 2022.
It’s currently trading with a price-to-earnings ratio of around 20, which isn’t overly cheap. However, this is a growth stock and its valuation is partially based on future earnings potential. Analysts are predicting considerable growth over the next five years.
There is geopolitical risk for the Taiwanese firm amid increasing Chinese assertiveness. However, TSM also operates foundries outside of the island nation. In 2021, TSMC announced a $100bn expansion plan for the next few years. The firm wants to stay at the forefront of the industry, but such a huge investment can be risky.
I’ve already bought NIO and TSM, and I’m looking to buy Ceres Power.