Oil (BZ=F, CL=F) rose this week on escalations in the Middle East. Solar stocks, on the other hand, saw a their shares prices decline despite the green energy push, with some companies saying they expect weak demand for solar products. Neil Dingmann, Truist Securities Managing Director – Energy, and Pavel Molchanov, Raymond James Managing Director, join Yahoo Finance to break down the current energy sector environment and give insight into the future of the these markets both near and long-term.
Dingmann on the near-term outlook for big oil states: “I think its going to be a bit more of the same. That is, these companies now are turning into, or have turned into just these huge shareholder return vehicles, and you’ve seen now Exxon (XOM) and Chevron (CVX) even today pay back billions of dollars each quarter to investors, so I think thats going to be the key.”
Watch the video above to hear Molchanov’s take on the solar spave.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
JULIE HYMAN: So what is the next year to two years look like for big oil?
– You know, I think it’s going to be a bit more of the same. And that is these companies now are turning into or have turned into just these huge shareholder return vehicles. And you’ve seen now Exxon and Chevron even today paying back billions of dollars each quarter to investors.
So I think that’s going to be the key is the capital discipline is going to stay on one side. And the other what that’s going to translate by keeping that production flat and keeping their spending relatively flat. They’re going to continue to have a ton of money to pay back to investors in the form of both dividends and buybacks. And I don’t think that’s going to change.
JULIE HYMAN: So Pavel we heard what Neil had to say about buy on Chevron– buy on Exxon, hold on Chevron– excuse me. When you switch it on over to the renewable space again, and again the selling that we have seen for much of the year in that group, are there opportunities now that you’re seeing?
PAVEL MOLCHANOV: All the stocks are on sale. That is absolutely true. So both on the interest rate freak out, just the macro multiple compression. That is the number one reason why the stocks are down. Some fundamental effect on the business, although that’s more secondary. So you mentioned Enphase, ENPH. This is an S&P 500. One of only three solar companies in the S&P 500, by the way.
So this stock a year and a half ago was trading at 45 times forward earnings. Today, it’s trading at 20 times forward earnings. Now, estimates have come down. That is also true. But the bulk of why the stock’s down is the compression and the multiples. So from 45 valuation cut in half to 20, that is not priced for perfection by any stretch of the imagination. I would look at that one.
On the small cap side, I would mention Ameresco, AMRC. This is a company that is involved in all kinds of facets of energy transition. It’s involved in efficiency, it’s involved in solar, and it’s involved in renewable natural gas. The latter two portions of the business depend on external capital, which is why this interest rate freak out, as you can see, has really decimated the stock over the past 100 days.
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