Citi: Fed rate cut imminent, bullish on prospects of green energy stocks
Citigroup strategist Drew Pettit stated that with the Fed rate cut, the outlook for the clean energy industry is positive, and the market will enter a new era of "green investment". Lower interest rates will stimulate the growth of green energy stocks. Citigroup has included water treatment company Ecolab and infrastructure company IDEX in its recommended list, believing that both still have development potential in the changing interest rate and political environment. At the same time, Citigroup focuses on three fundamental characteristics: positive cash flow, visible profit capability, and EBITDA growth, along with a buy rating on Ecolab with a target price of $265
According to the Zhitong Finance and Economics APP, Citigroup's US stock strategist Drew Pettit stated that as the Federal Reserve is about to start cutting interest rates, the prospects of clean energy infrastructure are expected to be boosted, ushering in a new era of "green investment".
Drew Pettit said, "Lower interest rates should help green energy stocks. I do believe that, in the long term, we are actually seeing a fundamental turnaround in these stocks, and their growth should accelerate again and outperform the broader market. Therefore, short-term catalysts can bring us back to green investments, while long-term catalysts can sustain the performance of these companies."
Drew Pettit believes that the industrial sector will definitely play a role in this new era, "I actually think that industry has played a huge role in the green transformation. We need to improve and change manufacturing processes so that we can effectively utilize our resources. Therefore, industry is an important part of the green revolution."
It is worth mentioning that Citigroup recently included water treatment and sanitation company Ecolab Inc. (ECL.US) and infrastructure engineering company IDEX Corporation (IEX.US) in its "Thematic 30" recommended list, stating that these two stocks still have good development prospects in changing interest rate environments or political situations.
In a client report at the end of August, Citigroup stated that three directions in the field of green energy—clean water, energy efficiency, and nuclear energy—have low sensitivity to interest rates and politics, attracting investors' attention. Drew Pettit said, "It is unlikely that the mid-term performance of 'green' stocks will be solely supported by interest rates and political catalysts. Therefore, we focus on three key fundamental characteristics—positive cash flow, visible profit capabilities, and accelerating EBITDA growth."
Citigroup described Ecolab Inc. as having "positive free cash flow" and "profitability", expecting its sales and earnings to continue growing until 2026. The bank upgraded its stock rating for Ecolab Inc. from "Neutral" to "Buy" in July, with a target price of $265. Meanwhile, Citigroup expects IDEX Corporation to rise by about 35% in the next 12 months to $277 per share