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The last time the feat was accomplished, the United States relied primarily on wood for energy. There’s no turning back now.

The world was a radically different place in 1880. The United States was only 15 years removed from the Civil War. The professional baseball organization known as the National League, which survives to this day as half of Major League Baseball, had existed for only four years. Light bulbs were used outside for the first time. The first patent was issued for a cash register.

It was also the last time energy consumption from renewable energy topped coal, according to historical data compiled by the U.S. Energy Information Administration (EIA). Well, that was until 2019, when the United States accomplished the feat again. Due to various market factors, the country will never again consume more energy from coal than renewables.

Here’s how the United States achieved the energy milestone, why there’s no turning back, and what it means for individual investors.

A milestone 139 years in the making

The last time the United States consumed more energy from renewable energy than coal was around 1880. To that point, biomass (primarily wood) was the primary energy source for the nation. But that changed as the first coal-fired power plants began producing electricity in the 1880s. While the first hydroelectric dams also entered operations that decade, coal proved much more scalable and distributable. By 1885, coal generated more total energy than renewable energy (still comprising only wood in that year) and held onto the edge for roughly 139 years.

That all changed in 2019, although a healthy dose of nuance is needed. Energy consumption from renewable energy topped coal last year, but only when all energy sources are counted. In other words, the math only works when electricity production, transportation, and consumption from industrial, residential, and commercial markets are combined. Similarly, renewable energy is a broad category that includes wind, solar, hydro, biofuels, other biomass, and several smaller contributors.

In 2019, energy consumption from renewable energy totaled 11.5 quadrillion British thermal units, or quads, according to the EIA. Coal was used to generate only 11.3 quads of energy last year. But the acceleration of the energy transition in the electric power sector means there’s no going back.

A combination of mild winter weather, natural gas prices that are at the lowest levels since 1995, the addition of nearly 33,000 megawatts of utility-scale wind and solar power, and the consumption-sapping effects of the coronavirus pandemic will combine to deliver a record blow to coal and a record bump to renewables in 2020.

In 2019, the United States generated 966 terawatt-hours of electricity from coal-fired power plants and 720 terawatt-hours from all utility-scale renewable energy power sources. That was the lowest output from the nation’s coal fleet since the 1970s and the highest ever for renewables.

In 2020, the United States might only generate 627 terawatt-hours to 724 terawatt-hours of electricity from coal (a 25% to 35% decline from the previous year), compared to 792 terawatt-hours from renewable energy sources (a 10% increase from the previous year). Adding small-scale solar bumps up the latter number to a projected output of 832 terawatt-hours, which would surpass the annual output from nuclear power for the first time since the 1980s.

IMAGE SOURCE: GETTY IMAGES.

What does the feat mean for investors?

The rapid growth of renewable energy is quite the feat. It was made possible by significant government policies, better wind turbine and photovoltaic panel technologies, and bountiful geographic advantages across the Lower 48. The value extended to renewable energy sources from the combination of those factors will likely compound in the next decade, which suggests natural gas-fired power plants could be the next assets to feel economic pressure from renewables starting in the 2030s.

But individual investors don’t have to sit out the next decade to benefit from the trend. Here are some investment ideas that contributed to renewable energy’s toppling of coal in 2019.

Coal: Investors should absolutely stay away from coal stocks. Coal-fired power plants are unlikely to regain much, if any, market share lost in 2020 due to factors described above. Investors can expect a wave of accelerated retirements in the coming years as power generators chase the enhanced economics from cleaner power sources. If your portfolio is exposed to companies such as coal-heavy PPL Corp that are moving more slowly than the energy transition, then that could be putting your capital at risk.

Biofuels: Aside from the electric power sector, renewable transportation fuels are the second-largest source of renewable energy in the United States. The country mandates 10% ethanol blends in the gasoline supply and relies heavily on biodiesel and renewable diesel each year.

Unlike electric power, biofuels have generally been a poor investment for individual investors. For instance, Green Plains (NASDAQ:GPRE) can produce 1.1 billion gallons of ethanol each year, but has struggled to overcome the weak margin environment of the industry. Ethanol prices in 2020 could be the lowest of the century. Green Plains has ambitious plans to increase operating efficiency and sell high-value, high-protein animal feed products. If the strategy works, then the small-cap stock could lift off multiyear lows for good. But it’s still too early to gauge progress.

Meanwhile, Renewable Energy Group (NASDAQ:REGI) has been a rare biofuels stock with above-average returns in recent years. But it, too, faces headwinds. It’s not profitable without generous government subsidies, although those are now in place through the end of 2022 for biomass-based diesel fuels. If the business can invest its cash hoard into high-value renewable diesel and retail sales, then it might be on sustainable footing in a few years.

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Wind: The EIA estimates the United States could add up to 20,400 megawatts of onshore wind power capacity in 2020. That could be affected by the coronavirus pandemic, but as of early May many power generators reported being on track with projects slated for completion this year.

Xcel Energy (NYSE:XEL) is leading the way. The company, which owns four electric utilities in the American wind corridor, is bringing 1,692 megawatts of new wind power projects into service in 2020. It recently placed the 200-megawatt Blazing Star 1 project into operation, has another 300 megawatts slated for completion in 2021, and expects to have over 4,300 megawatts of owned wind capacity in service when the dust settles.

Solar: The EIA estimates the United States could add up to 12,700 megawatts of utility-scale solar power capacity in 2020. NextEra Energy (NYSE:NEE) is one of the companies leading the way. Through its Florida Power & Light subsidiary, the company plans to build 10,000 megawatts of solar power by 2030. That includes 1,200 megawatts that have or will enter service in 2020. The low operation costs of solar farms are expected to allow the electric utility to keep customer bills low and shareholder value trekking higher.

Renewable energy is just getting started
The United States consumed more total energy from renewable energy than coal in 2019 for the first time in about 139 years. That’s an impressive feat, but the trend is still getting started.

Renewable energy accounted for only 11% of the nation’s total energy consumption last year. There are major growth opportunities in stealing the rest of coal’s market share (which would double total renewable energy consumption) in the 2020s, beginning to pressure natural gas in the 2030s, and powering cars and trucks as the transportation sector moves toward electric mobility. That suggests individual investors have many more opportunities to pounce on the energy transition — and certainly won’t have to wait another 139 years for the next big milestone.

Author: Maxx Chatsko

Source: Fool: Party Like It’s 1880: Renewable Energy Consumption Surpasses Coal

The United States could add a record 33,000 megawatts of renewables to the grid in 2020, but a record build out of transmission will be needed to keep growth humming along.

The United States is in the midst of a historic energy transition away from fossil fuels to low- and zero-carbon electric power. In 2020 alone, the nation could add 20,400 megawatts of onshore wind capacity and 12,700 megawatts of utility-scale solar capacity, according to the U.S. Energy Information Administration (EIA).

That would be a record volume of additions (assuming the coronavirus pandemic doesn’t delay construction timelines), but it creates one significant challenge for future renewable energy growth: transmission capacity. It’s often overlooked in the discussion of renewable energy stocks, but transmission is one of the largest sources of planned capital investment for many power generators through 2035.

Considering transmission is accounting for an increasing share of revenue and earnings growth for many electric utilities, it’s something investors need to begin paying closer attention to.

Build power assets, curtail energy, build transmission, repeat

Unlike thermal power plants, the location of wind and solar farms is dictated by geography. That can create challenges when assets are erected in rural areas far away from roads, major population centers, and existing power lines. Unfortunately, much of the country’s best geography for wind and solar power production is located in areas that historically haven’t been an integral part of the nation’s grid infrastructure.

That has created local and regional problems in clean energy distribution. Take Texas as an illustrative example. The state is home to over 29,000 megawatts of onshore wind power capacity, which represents 27% of the total in the United States and is more than all but four countries.

By 2010, Texas had installed more than 14,000 megawatts of wind power capacity. Half of that came online from 2006 to 2009 and was primarily located in West Texas, which lacked adequate transmission lines at the time to transport electricity to the state’s population centers to the east. That led to some wonky market dynamics.

In the first half of 2011, the Electric Reliability Council of Texas (ERCOT) — the regional grid operator — was routinely curtailing 2,000 megawatts of wind power per hour. Electricity prices averaged negative $10 per megawatt-hour during that span.

By 2014, Texas installed more than 3,500 miles of new transmission lines to ease congestion and reduce curtailments in the ERCOT system. In fact, the new transmission lines in the state helped to raise the national average utilization rate for wind power from less than 30% in 2010 (reflecting curtailments) to 34% in 2014.

That might be an extreme example — or not. Similar congestion and curtailment challenges have cropped up in California and the Midwest in recent years as the build out of new wind and solar power capacity infrastructure outpaces transmission capacity.

With a record 33,000 megawatts of utility-scale renewables slated to begin operations in 2020, investors might expect more curtailments in the near future. Luckily, the industry has big plans to install tens of thousands of miles of new transmission in the coming years and invest heavily in another under-the-radar technology.

IMAGE SOURCE: GETTY IMAGES.

These companies are investing (big) in transmission

An electric utility generates revenue and earnings from its rate base, which is the total value of generation, transmission, and distribution assets. Each type of infrastructure has a unique regulatory mechanism to recover invested capital. When a company invests to maintain or upgrade its infrastructure, then it can earn a rate increase (meaning the prices charged to customers) from state regulators. A larger rate base is generally more valuable.

That’s important because transmission assets are likely to become the largest part of the rate base for many companies in the near future. Xcel Energy (NYSE:XEL) expects its rate base to grow from $30 billion in 2019 to $42 billion in 2024. Transmission assets will grow from 25% to 27% of that total, which suggests the total value of transmission assets will grow 51% in that five-year span.

The roughly $4 billion capital investment in transmission infrastructure through 2024 will be dwarfed by the next major build out. Xcel Energy estimates it could invest $15 billion to $20 billion in transmission assets from 2025 to 2035.

The plan would enable more renewable energy assets to be built in the regions in which its four electric utilities operate and replace aging and less efficient assets. In fact, Xcel Energy’s transmission build out is one of four strategic priorities through 2035. The other three receive more attention among investors, such as adding wind and solar, deploying energy storage technologies, and preparing for electric vehicle growth.

Xcel Energy can justify up to $15 billion of capital investment in transmission infrastructure because it operates in the American wind corridor and sun-soaked West, which has plenty of untapped potential for new renewable energy assets. Transmission will be important to companies in other geographies, but there are other ways to address congestion and curtailment challenges.

IMAGE SOURCE: GETTY IMAGES.

Eversource (NYSE:ES) operates primarily in New England. The region has less favorable renewable energy potential compared to other parts of the country, lacks pipelines for natural gas, barely relies on coal-fired power plants, and has several nuclear retirements scheduled. If any region requires a retooling of transmission infrastructure relative to population density, then New England is a good bet.

The company has responded with $9.3 billion in capital investment in transmission infrastructure from 2001 to 2018. That has driven transmission-related earnings from just $28 million in 2004 to $427 million in 2018. That was roughly 41% of total earnings in that year.

The business has another trick up its sleeve: energy efficiency. Closely tied to updating transmission infrastructure, energy efficiency has allowed many power generators across the country to retire coal-fired power plants without needing to replace them with additional power assets.

Eversource currently spends 5% to 7% of total revenue on energy efficiency alone — easily the most in the nation. That has earned the company and its subsidiaries several accolades, including most energy efficient utility in the United States (Eversource Massachusetts) and top energy efficiency provider in the United States (overall company average).

The investments in transmission infrastructure and energy efficiency have fortuitously positioned Eversource to capture a major opportunity somewhat unique to New England: offshore wind energy. Today, the United States operates only 30 megawatts of offshore wind capacity, but an opening of permits and new partnerships has pushed the country’s current project pipeline to over 23,000 megawatts. Much of that could be built by 2030.

Although more expensive to build, offshore wind power has a handful of advantages. It can operate at a relatively high utilization rate (matching or besting fossil fuel plants), can be positioned close to major population centers (many cities are on located on coasts, including on the Great Lakes or major seas), and doesn’t displace land from other uses (fishing aside). Eversource is forging ahead with up to 4,000 megawatts of offshore wind power projects.

IMAGE SOURCE: GETTY IMAGES.

Investors can no longer overlook transmission

While the United States has some of the best geography for wind and solar power on the planet, power generators and electric utilities can’t just throw up some wind turbines and start raking in money. Adequate transmission and distribution infrastructure needs to be in place, but that often lags behind the initial build out of generation infrastructure.

Luckily, even though it may not be on the radar of many investors, companies such as Xcel Energy and Eversource are taking the challenge seriously. The pair have committed tens of billions of dollars in capital investment in transmission infrastructure for the regions in which they operate. Many of their peers have or will soon follow.

Simply put, as renewable energy power capacity grows by record volumes in the 2020s, investors will need to begin paying closer attention to transmission infrastructure. Without it, wind and solar farms might be significantly less valuable.

Author: Maxx Chatsko

Source: Fool: The Next Big Obstacle in Renewable Energy Is a Big Opportunity for Investors

The wind drought that plagued investors in 2018 and 2019 is likely over, but that’s only one of the factors to consider.

Renewable energy is poised for a decade of epic growth. Utility-scale solar and onshore wind continue to smash through most forecasts from previous years. If favorable economics continue to drive investment in the renewable duo, then utility-scale solar and onshore wind could generate 30% of America’s total electricity in 2030, with all zero-carbon energy sources providing as much as 60%.

While many projections expect solar power to eventually become the nation’s and the world’s top source of electricity, that milestone is still decades away. For now, wind power will continue to dominate the renewable energy landscape. In fact, three factors will make 2020 the biggest year yet for wind power and the renewable energy stocks driven by it.

1. The wind drought is (probably) over

Investors with exposure to renewable energy have come to dread three simple words in recent years: “lower wind resource.” That phrase has been uttered by electric utilities and power generators since the middle of 2018 to explain why revenue growth stalled compared to the year-ago period in question.

The wind drought, as it has come to be called, caused NextEra Energy Partners (NYSE:NEP) to miss out on about $18 million in revenue in the first half of 2019. That was equivalent to 6% of total revenue in that span. Meanwhile, NextEra Energy (NYSE:NEE) cited lower wind resource as the primary reason it reported a $229 million reduction in first-half revenue for its power generation subsidiary, NextEra Energy Resources, compared with the year-ago period. That was equivalent to roughly 5.5% of the subsidiary’s total revenue.

Fortunately, the latest numbers suggest the wind drought is most likely over. In the first half of 2019, the United States produced only 1.6% more electricity from onshore wind turbines compared with the same period the previous year. That’s despite a 15% surge in installed capacity in that span.

In the second half of 2019 (with data through November), the United States produced 22.4% more electricity from onshore wind turbines compared with the same period in 2018. That outpaced the 17% increase in installed capacity in that span.

In other words, a subsiding wind drought and improved technology from newer turbines should allow investors to reap the rewards of wind energy’s recent expansion (dating back to capacity growth in 2018) once fourth-quarter and full-year 2019 earnings are released. Then again, the benefits should extend beyond one quarterly report.

2. A near-record amount of wind came online in 2019

The U.S. Energy Information Administration (EIA) expected 12,200 megawatts of wind power to come online in 2019. That would have represented the second-highest level of capacity additions in a single year, behind only the 13,200 megawatts installed in 2012. For comparison, no other year has eclipsed 9,000 megawatts.

Most important for investors is the fact that an estimated 6,000 megawatts came online in December 2019. In other words, most of last year’s additions weren’t reflected in last year’s electricity data because they weren’t even in operation. When combined with the subsiding wind drought, the new capacity should drive American wind power to significant year-over-year growth in 2020.

It’s unlikely to be a one-time fluke.

3. A record amount of wind is expected to come online in 2020

The EIA expects a record 14,300 megawatts of wind power to enter service in 2020. Over 10,000 megawatts is expected to come online from September to December of this year, including 7,200 megawatts in the final month. That four-month figure is enough to increase the nation’s total installed capacity by roughly 10%.

The growth will be impressive. What might be more impressive is that a handful of companies will be responsible for the lion’s share of it. For example, Xcel Energy (NASDAQ:XEL) expects to place 1,922 megawatts of new wind power into service in 2020. That will help the electric utility holding company roughly double the amount of wind it directly owns by the end of 2021. When capacity from power purchase agreements is counted, the company expects to tap into 11,000 megawatts of total wind by the end of 2021.

It’s all part of the company’s “steel for fuel” strategy, which aims to replace resource-intensive coal-fired power plants with low-cost wind farms. Xcel Energy expects fuel expenses to represent only 28% of an average customer bill by 2024, down from 47% in 2010. That should also fuel earnings and dividend growth for shareholders, too, to the tune of 5% to 7% per year for the foreseeable future.

The extra cash flow should help Xcel Energy divert resources to transmission line investments, which are likely to be the next major obstacle (and opportunity) in renewable energy, since renewables can both cause or relieve grid-level congestion. But those announcements aren’t expected until the second half of the decade. For now, and especially in 2020, onshore wind power will continue to dominate the renewable energy landscape.

Author: Maxx Chatsko

Source: Fool: 3 Reasons Wind Power Is Poised for a Breakout in 2020

These two renewable energy stocks offer investors a way to own a piece of the ongoing energy transition, which will accelerate in the 2020s.

Too many discussions about renewable energy and climate change slant toward pessimism and fear, but the numbers clearly show that the United States is rapidly decarbonizing its economy.

The nation has reduced carbon emissions by more than any other this century. By 2030, the United States could generate as much as 30% of its total electricity from onshore wind and utility-scale solar, and 70% from all zero-carbon energy sources combined. If electric vehicles take off as expected this decade, then America’s decarbonization efforts are on track to meet previous near-term commitments to the Paris Agreement or Clean Power Plan — even without any coherent federal action.

The trends strongly suggest that individual investors have at least some exposure to renewable energy stocks. Two businesses for closer examination in early 2020 are low-carbon power generator NextEra Energy Partners (NYSE:NEP) and solar hardware leader Enphase Energy (NASDAQ:ENPH).

A rare bout of uncertainty was handled with ease

Pacific Gas and Electric Company, or PG&E, was saddled with much of the blame for deadly wildfires that ripped through northern California in 2017 and 2018. The insurmountable liabilities related to those catastrophes forced the electric utility to file for bankruptcy in early 2019. It also forced NextEra Energy Partners to scramble in an attempt to contain the fallout, as the partnership sold electricity to PG&E in renewable energy contracts that many feared would be significantly altered in bankruptcy court.

The partnership handled the uncertainty remarkably well. In fact, less than two months after PG&E filed for bankruptcy, NextEra Energy Partners announced multiple transactions to replace cash flow generation from PG&E-related assets (just in case) and achieve its full-year 2019 growth objectives. The partnership doesn’t have to acquire any new assets until 2021 to meet its stated goal of growing annual distributions by at least 12% per year.

That doesn’t necessarily mean the business will lay dormant until 2021. NextEra Energy Partners has a history of maximizing its relationship with NextEra Energy Resources (NEER), the power-generation arm of parent NextEra Energy. A cozy relationship allowed the partnership to end 2019 with 5,330 megawatts of renewable energy assets. According to investor presentations, the growth plans at NEER alone could allow the partnership to grow its footprint 12% per year through 2024.

That’s promising — and it doesn’t include the recent reawakening of the partnership’s natural gas pipelines business. While the ability to act on those ambitions depends on securing new financing, the business model allows NextEra Energy Partners to borrow based on cash flow generation, which is relatively stable thanks to the nature of electricity supply contracts inked with customers. That provides confidence that this renewable energy stock can continue to beat the S&P 500 over the long haul.

Overpriced? Consider the long-term product portfolio

A combination of changing electrical codes, the rollout of better technology, and the beginning of the end of the investment tax credit (ITC) for solar projects allowed Enphase Energy to finally profit from its leadership in solar microinverters last year. Shares soared 452% in 2019, although there was plenty of volatility in between as investors oscillated on their definition of the word “overpriced.”

The same nervous energy is gripping the stock at the start of 2020. Shares trade at 83 times earnings from the last 12-month period and at 30 times estimated future earnings. The solar stock sits at 25 times book value, primarily because the company’s balance sheet lists few assets. But is the stock actually expensive if investors take the long-term view?

Enphase Energy broke out last year thanks to great market traction for its latest-generation IQ 7 microinverters. In the first nine months of 2019, revenue grew 85% year over year and operating income jumped to $58.3 million, up from an operating loss of $3.4 million in the year-ago period. There were some signs that fourth-quarter revenue was going to be weaker than investors might have expected, but the business is well positioned to continue growing in the years ahead.

In November, the company launched its IQ 7A microinverter, which is specially designed for high-capacity 450-watt solar panels. Those same panels are expected to play a pivotal role in significantly driving down the cost of electricity generated from solar assets both large and small in the next few years, which suggests Enphase Energy could lean on the new microinverters for near-term growth.

Investors also cannot overlook the upcoming launch of IQ 8 microinverters, which are smaller and more powerful than IQ 7 products. The next-generation platform can simplify power management devices, enable entirely new system management applications, and lower module-level costs. There’s also the long-awaited ramp of the Encharge energy storage portfolio, which will be closely watched in 2020.

In other words, analysts worried that the company’s market share in microinverters is unsustainably high are missing the bigger picture. Even if Enphase Energy sees a dip in its relative market share, the absolute opportunity in microinverters from hypergrowth in the solar industry will continue to expand. What’s more, the company can leverage its brand name and customer relationships to build business in additional solar hardware products, such as module management and batteries. Given the rampant growth of small-scale and utility-scale solar in the United States, this renewable energy stock might be well worth its premium.

Author: Maxx Chatsko

Source: Fool: 2 Top Renewable Energy Stocks to Buy Right Now

Investors were caught off guard when the genetic medicines company earned marketing approval for its second RNAi drug product sooner than expected.

Surprises in the biopharma industry are probably biased toward bad news, but Alnylam Pharmaceuticals (NASDAQ:ALNY) bucked the trend on Nov. 20 by announcing that it earned marketing approval for a drug candidate only four months after submitting a new drug application (NDA) to the U.S. Food and Drug Administration (FDA). It typically takes six to 10 months — or longer — for a decision to be handed down.

Shares have risen rapidly as Wall Street analysts scramble to update their financial models for the business. The company thinks the drug, Givlaari (givosiran), a treatment for adults with a rare disease called acute hepatic porphyria (AHP), could capture most of the estimated $500 million market opportunity.

The approval gives Alnylam Pharmaceuticals two marketed products and confidence it can increase that to four by the end of 2020. It also suggests that the company’s targeted delivery approach could overcome previously encountered obstacles for the technology platform.

Is this a big moment for RNAi medicines?

Gilvaari is only the second drug based on RNA interference (RNAi) to earn FDA approval. The first was Onpattro (patisiran), also belonging to Alnylam Pharmaceuticals and approved 16 months ago.

But the latest approval is still an important milestone for both the company and the therapeutic technique. Why? Gilvaari is the first RNAi drug to utilize GalNAc-conjugation to earn marketing approval. What does that mean?

RNAi is a technique that can silence genes — in this case, disease-driving genes. But the therapeutic payload has to be efficiently delivered to the correct cells. Past failures prompted Alnylam Therapeutics to pioneer the GalNAc-conjugating approach, which couples the gene-silencing payload to the sugar N-Acetylgalactosamine, or GalNAc. The sugar has a high affinity to certain receptors presented on the surface of liver cells, which is where the RNAi payload must end up anyway, making for a perfect pairing.

Gilvaari is the first drug product based on the targeted delivery approach to make its way from discovery efforts to preclinical proof-of-concept to clinical trials to marketing approval. It bodes wells for the future of RNAi therapies, which theoretically present several advantages over other medicines, including limited dosing requirements and relatively clean safety profiles. And since the liver is a therapeutically important organ, the technique’s success could usher in a new era of precision genetic medicines for treating everything from rare diseases to cardiovascular diseases. It may even provide functional cures for chronic hepatitis B, which results in more human deaths each year than malaria.

That explains why news of Gilvaari’s approval also pushed up shares of Arrowhead Pharmaceuticals and Dicerna Pharmaceuticals, two companies developing targeted RNAi drug candidates of their own based on similar chemistry to GalNAc. They’ve gained 72% and 46%, respectively, in November. But Alnylam Pharmaceuticals expects to deliver much more value to patients and shareholders sooner than its peers.

What’s ahead for Alnylam Pharmaceuticals?

In the immediate future, investors can expect Alnylam Pharmaceuticals to ramp up sales of Onpattro and Givlaari. Analysts anticipate the former will achieve peak annual sales of around $1 billion, while the total market opportunity for the latter is about $500 million.

Investors don’t have to wait long for additional catalysts. Alnylam Pharmaceuticals expects to have four products approved for use by the end of 2020 — double its total at the end of 2019 — and potentially more within the next two years. Here’s how management expects that to play out:

That said, Alnylam Pharmaceuticals is still growing into its $13 billion market valuation, which is a little frothy relative to operations in the first nine months of 2019:

While investors are enthusiastic about the company’s progress and potential, the current market valuation certainly represents a premium. The RNAi pioneer trades at 77 times sales, which is expensive even in the context of a promising, high-growth pharmaceutical stock. Even if the business achieves peak annual sales for both of its currently approved products, the stock would be trading at roughly 10 times sales — more reasonable, but also at a date much further in the future.

In other words, Alnylam Pharmaceuticals needs near-perfect execution just to live up to its current valuation, let alone earn a much higher market cap. That suggests that individual investors may want to exercise some caution when approaching this RNAi stock, although it’s definitely one to watch closely in the next year — especially if shares fall from current levels.

Author: Maxx Chatsko

Source: Fool: Does a Surprise Approval Make Alnylam Pharmaceuticals a Buy?

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