Wall Street is looking to continue its record run this morning as we wrap up the first week in trading of the new year. The Nasdaq, S&P 500 and the Dow all closed at record highs yesterday and all are tracking for weekly gains despite Monday’s sharp decline. Let’s see if the market will continue to shrug off rising Coronavirus numbers and turmoil at the Capitol.
One bright spot in the news that’s easing investor sentiment is that President Trump finally admitted, despite vowing never to concede, that a “new administration will be inaugurated” on Jan. 20.
Our trade alert for today highlights a “best in show” stock within an industry that is expected to get a big boost under the new administration, based on president-elect Joe Biden’s well-known advocacy of the industry.
Atlantica Sustainable Infrastructure PLC (AY), which was formerly known as Atlantica Yield plc, is an infrastructure company. Based in Brentford in the United Kingdom, the company owns and manages renewable energy, natural gas, transmission and transportation infrastructures and water assets. AY currently owns 25 assets, comprising 1,496 MW of aggregate renewable energy installed generation capacity, 343 MW of efficient natural gas-fired power generation capacity, 1,166 miles of electric transmission lines, and 10.5 Mft3 per day of water desalination assets.
It’s hard to call AY a true “Biden stock.” That’s because it’s not a pure play on the American Green New Deal – it’s a British company with operations scattered across the globe, though some of those assets are in the U.S. But if you believe that a rising tide lifts all boats and that a massive wave of new investment in green infrastructure will likely boost all stocks in the sector, Atlantica is an interesting play.
For the quarter ended September 2020, AY’s revenue increased 3.3% year-over-year to $303 million. Its net profit increased 103.7% year-over-year to $89.4 million. EPS increased 104.7% year-over-year to $0.88. And for the nine-month period ended September 2020, revenue from the water segment increased 63.7% year-over-year to $30.2 million.
Analysts expect AY’s revenue to increase 18.2% for the current quarter which ended in December, 8.7% for 2020, and 7.8% this year. The company’s EPS is expected to increase 2,100% for the current quarter, 55.7% this year, and at a rate of 49.5% per annum in the next five years. The stock has gained over 70% in the past twelve months and we think there is plenty more tailwind for AY due to technological advancements and cost cutting strategies adopted by the company.
AY recently announced the acquisition of a district heating asset in Canada. And in August, the company completed the acquisition of an additional equity interest in Solana, in Arizona. The company refinanced its Helios assets with a €326 million bond. In August, AY successfully closed an issue of $115 million of unsecured Green Exchangeable Notes. Also, earlier this year, the company received the “Pump Industry Excellence Award for Innovation and Technology” from the Hydraulic Institute.
Atlantica should enjoy a nice run under a greener U.S. administration. But apart from the potential capital gains, the stock also sports an attractive dividend yield at 3.69%. That’s the sort of yield you’d generally expect to find in a traditional energy company, not a sustainable one.
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