If people thought the travel industry was the worst-hit industry by a once-in-lifetime pandemic, then one should check out renewable energy stocks.
Repeated blows to the flying industry by successive pandemic flare-ups stalled the revival of the tourism and airlines industry. As per Bloomberg News, Leisure and Travel was the worst-performing sector as seen in the Stoxx Europe 600 index in 2021 compared to the rallies inequities across other sectors to a record high.
Surprisingly, airlines stocks outperformed green stocks despite governments’ pledge globally to cut greenhouse emissions and invest more in clean energy.
As the Stoxx 600 index scaled new highs, the renewable energy stocks were down by 20% in 2021, as seen in the most liquid and largest European stocks.
Compared to a 37% drop in Siemens Gamesa Renewable Energy and a 33% decline in Oersted A/S, a champion in the wind farm, the 20% and 12% decline in Lufthansa AG and British Airways respectively, though disappointing but looked stellar.
This year, Vestas Wind Systems declined nearly a third of its value. It warned that more pains are ahead with supply chain bottlenecks and rising commodity prices disrupting production.
The raw materials cost was not the only reason for dismal returns. Green stocks find that much of the good news from governments’ pledge for clean energy is already factored into the price, which saw the rallies in 2019 and 2020.
Despite the plunging of share prices, Siemens Gamesa traded 52 times and Vesta 45 times its projected earnings for 2022. This is much higher than the 15.7-time earnings of Stoxx 600 stocks.
Despite equity experts from Société Générale, Goldman Sachs, and BlackRock saying that decarbonization offers massive opportunities to investors, the short-term headwinds continue to remain.
As per a note from Laurent Douillet and Tim Craighead, strategists at Bloomberg intelligence, the lower sales, and higher steel prices put pressure on wind energy turbines profits.
