High-Conviction Energy Picks: Stocks to Watch for Robust Gains

The energy sector continues to exhibit strength this year, with certain stocks standing out in their respective fields. UBS has highlighted a selection of energy and utilities stocks that they consider to be the most compelling for investors looking to capitalize on current trends. Each of these stocks combines robust fundamentals with significant growth potential, making them attractive options for those looking to diversify into energy.

SLB (NYSE: SLB) – A Leader in Oilfield Services

SLB, formerly known as Schlumberger, stands out in the oilfield services and equipment sector with a price target of $68, indicating a substantial 49.2% upside potential. Despite a 12% decline this year, analyst Josh Silverstein sees tremendous value in SLB due to its favorable pricing compared to historical averages and its leading position in offshore drilling. Silverstein commends SLB’s high-margin Digital and Integration unit and improved financial health, which supports strong EBITDA growth and generous shareholder returns.

In addition to these highlighted stocks, UBS also recommends keeping an eye on other key players in the energy and utilities sectors, such as Coterra and Suncor Energy, for their stable performance and potential for growth. These stocks offer investors an excellent opportunity to engage with the energy sector through companies that are well-positioned to thrive amid evolving industry dynamics and increasing global energy demand.

NextEra Energy (NYSE: NEE) – Pioneering Renewable Energy Growth

NextEra Energy has been identified as a top pick in the electric utilities sector, thanks to its leadership in renewable energy development and a strong financial foundation. With a 19% funds from operations to debt ratio in 2023, the company’s financial health is robust. Analyst William Appicelli highlights the upcoming June 11 biannual investor meeting and potential clean energy contract announcements as key catalysts that could further drive the stock’s performance. Currently, the stock has risen nearly 30% this year, and with a price target of $90, it suggests an additional 15.1% upside, reflecting the company’s promising future in renewable energy.

First Solar (NASDAQ: FSLR) – Capitalizing on Tech and Protectionism

First Solar receives high marks for its unique technology and strategic positioning to benefit from AI-driven electricity demand and U.S. protectionist policies. The company is notably expanding its U.S. manufacturing capacity to meet growing demand. Analyst Jon Windham assigns a price target of $350, representing a 26.5% potential upside, with the stock already up about 52% this year. Windham praises First Solar’s significant share of the utility-scale market and its appeal to big tech companies eager to match their electricity use with renewable sources, meriting a higher valuation multiple.