Trump's Win, Economic Challenges Lead to Tougher Outlook for Renewable Energy Stocks: Morgan Stanley

The recent U.S. presidential election results, including a Republican sweep, have raised questions about the future of renewable energy under President-elect Donald Trump’s leadership.

Morgan Stanley’s report evaluates the economic impact on renewables under various policy scenarios and its effects on earnings.

The analyst has adjusted its view on the clean tech industry to “In-Line” from “Attractive.”

Also Read: Solar, Renewables Stocks Crash After Trump Win: Should You Buy Now At Cheap Valuations?

While long-term demand for renewables is likely stronger than current market perceptions, near-term growth prospects have become less clear due to new uncertainties.

It’s important to remember that these new uncertainties add to the already difficult environment facing the clean energy sector, dealing with issues such as permitting and interconnection delays, funding challenges, and intense competition that have hurt profitability.

Uncertainty about the Inflation Reduction Act (IRA), tariffs, and interest rates has significantly impacted clean fuel valuations.

Morgan Stanley writes that clear guidance on the IRA is essential for clean tech valuations to rebound. However, this may take time since it will likely be linked to discussions about the Tax Cuts and Job Act (TCJA), which is set to expire at the end of 2025.

Morgan Stanley recommends investing in stocks with high-quality and durable growth/ margins, with a clear catalyst path and/or strong balance sheet to weather any near-term volatility in growth and/or profitability.

However, the analyst has downgraded three cleantech stocks from Equal-weight to Underweight, including: