In this article, we will be looking at what the inflation reduction act is and the stocks that will benefit from the inflation reduction act. Read through for more detailed information.
The recently passed Inflation Reduction Act will combat inflation, reduce the skyrocketing cost of prescription drugs, reduce healthcare costs, make historic investments to combat climate change, and significantly reduce the deficit.
What is an Inflation Reduction Act?
The Inflation Reduction Act of 2022 (IRA) is a landmark United States law that aims to reduce inflation by reducing the deficit, lowering prescription drug prices, and investing in domestic energy production while encouraging the use of clean energy.
On 16th August 2022, President Joe Biden signed it into law after it was enacted by the 117th United States Congress. Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV) have introduced a budget reconciliation bill (D-WV).
Negotiations on the planned Build Back Better Act resulted in the measure, which was trimmed and completely modified from its first version after Manchin rejected it. It was proposed as an amendment to the Build Back Better Act, and the legislative text was replaced.
Who benefits from the Inflation Reduction Act?
The Inflation Reduction Act will shield Medicare recipients from catastrophic prescription costs by gradually implementing a cap on out-of-pocket expenses and imposing a $35 cap on a month’s supply of insulin.
In addition, for the first time in history, Medicare will be authorized to negotiate medication costs for high-cost drugs.
List of 7 Stocks that will Benefit from the Inflation Reduction Act
We chose organizations in the renewable energy, health insurance, and electric vehicle industries that could gain from the Inflation Reduction Act of 2022. As of Q1 2022, we ensured that the selected stocks had excellent business fundamentals, solid future outlooks, positive hedge fund sentiment, and optimistic analyst ratings. And the stocks include the following:
#1. Rivian Automotive, Inc.
Rivian Automotive (NASDAQ: RIVN) is a California-based electric vehicle and accessory maker. In partnership with Amazon, the company also manages the Rivian Commercial Vehicle platform for electric delivery vans.
Rivian Automotive, Inc. (NASDAQ: RIVN) has key production operations in Illinois, California, Michigan, and Arizona, which conforms to the Act’s requirements and qualifies it as a beneficiary. To fully benefit from the Inflation Reduction Act, Rivian Automotive, Inc. (NASDAQ: RIVN) must introduce new models priced under $55,000.
Morgan Stanley analyst Adam Jonas advised investors on 12th August that, while considerable cash burn would continue at Rivian Automotive (NASDAQ: RIVN), liquidity can endure into most, if not all, of FY23. Rivian Automotive (NASDAQ: RIVN) reassured shareholders about its FY production objective of 25,000 vehicles, as its reservation book increased from 90,000 to 98,000. As a result, the analyst maintained his ‘Overweight’ rating and $60 price objective for the stock.
#2. Plug Power
Plug Power is constructing an end-to-end green hydrogen ecosystem, including production, storage, and delivery, as well as energy generation. The corporation intends to construct and operate green hydrogen motorways throughout North America and Europe.
Plug will provide green hydrogen solutions to customers directly as well as through joint venture partners in a variety of end sectors, including material handling, e-mobility, power generation, and industrial applications.
#3. First Solar, Inc. (NASDAQ: FSLR)
First Solar, Inc. (NASDAQ: FSLR) is a firm established in Arizona that offers photovoltaic solar energy solutions in the United States, Canada, India, Australia, Japan, France, and other foreign markets. First Solar, Inc. (NASDAQ: FSLR) is a leading American renewable energy company that stands to benefit the most from the Inflation Reduction Act. On 8th August, the stock gained 9% as the climate measure made headlines.
On 11th August, KeyBanc analyst Sophie Karp raised her price target on First Solar, Inc. (NASDAQ: FSLR) to $145 from ‘Sector Weight.’ According to the analyst, the manufacturing tax credit for domestically manufactured solar panels makes First Solar (NASDAQ: FSLR) the most direct beneficiary of the Inflation Reduction in her coverage.
Despite the IRA’s comparative outperformance since its initial public offering, the analyst anticipates potential upside, particularly given First Solar, Inc.’s (NASDAQ: FSLR) success in scaling larger plants and lowering input costs.
According to the analyst, First Solar, Inc. (NASDAQ: FSLR) should be eligible for over $400 million in tax credits and reach at least a 20% gross margin on over $3 billion in revenue by 2025.
#4. Sunrun Inc.
Sunrun Inc. (NASDAQ: RUN) is based in San Francisco, California, and was founded in 2007. In the United States, the company specializes in home solar energy systems. It is one of the best-positioned solar panel companies to benefit from the Senate’s recently announced climate change package.
Sunrun Inc. (NASDAQ: RUN) announced a 45% rise in revenue year over year (YoY) in Q2 2022, with total customers jumping 21% YoY to more than 724,000. Sunrun Inc. (NASDAQ: RUN) continues to estimate solar energy installed growth of 25% or more for 2022, following the installation of 246.5 MW in the second quarter.
On 8th August, JPMorgan analyst Mark Strouse boosted Sunrun Inc.’s (NASDAQ: RUN) price target to $65 from $52 and maintained an ‘Overweight’ rating on the stock.
The Inflation Reduction Act, according to the analyst, is the largest program in US history to encourage growth in a transformational move to renewable energy. Although alternative energy stocks have also risen since the bill initially made news, the analyst believes that most companies in the sector still have room to grow.
#6. Energy Transfer LP
Energy Transfer LP (NYSE: ET) is a Texas-based corporation that provides energy-related services like infrastructure, natural gas storage facilities, and gas transportation pipes. Energy Transfer LP (NYSE: ET) looks to profit from the Inflation Reduction Act, which attempts to decrease uncertainty around new infrastructure investments.
Gas is a cleaner energy source than coal, and throughout the transition to renewables, natural gas will be favored until renewable energy is widely adopted. This transformation might take years, during which time gas businesses like Energy Transfer LP (NYSE: ET) will profit, and the government will continue to fund new pipelines and also energy infrastructure.
On 3rd August, Energy Transfer LP (NYSE: ET) released its second-quarter results, announcing GAAP profits per share of $0.39, $0.02 more than the market consensus. Revenue for the corporation was around $26 billion, growing 71.5% year on year and surpassing Wall Street’s projections by $5.57 billion. On 26th July, Energy Transfer LP (NYSE: ET) declared a quarterly dividend of $0.23 per share, a 15% increase over the previous payout of $0.20.
The dividend will be paid on 19th August to shareholders of record on 8th August. As of 12th August, ET stock has a dividend yield of 7.93%. The company intends to increase shareholder value while maintaining its leverage ratio of 4.0x-4.5x debt-to-EBITDA.
SunPower is a leading provider of solar technology and energy services that provides fully integrated solar, storage, and home energy solutions to clients primarily in the United States and Canada via a variety of hardware, software, and finance choices, as well as smart energy solutions, SunPower (SPWR) is positioned to be part of the beneficiaries of the Inflation Reduction Acts.
The company’s sales channels include a network of installation and uninstalling dealers and resellers in residential and commercial sectors, as well as in-house sales teams in each segment engaging in direct sales to end customers.
#7. Sunnova Energy International Inc.
Sunnova Energy International (NYSE: NOVA) is a Texas-based firm that provides solar energy services to residential customers in the United States. Sunnova Energy International (NYSE: NOVA) more than quadrupled its revenue year on year in the second quarter of 2022, adding 17,300 new subscribers.
Sunnova Energy International (NYSE: NOVA) is positioned to be one of the beneficiaries of the Inflation Reduction Act’s environmental and energy efforts. Revenue increased 121% to $147 million in the second quarter, exceeding expectations by $60.11 million. Sunnova Energy International Inc. (NYSE: NOVA) also confirmed its 2022 guidance of 85,000 to 89,000 new customers and adjusted EBITDA of $117 million to $137 million.
Is there a stock tax in the Inflation Reduction Act?
President Biden signed the Inflation Reduction Act (the Act) into law on 16th August 2022, imposing a 1% excise tax on public firm stock buybacks and a 15% alternative minimum tax (AMT) on corporations with book income over $1 billion beginning in 2023
What does the inflation Reduction Act mean for the US energy sector?
The Act to Reduce Inflation: 1. Reduces energy costs for Americans through enacting policies that cut gas prices and electricity bills, assist customers in affording technologies that reduce emissions and energy prices, and reduce costs that would otherwise be passed on to them.
What should I invest in when inflation hits?
- Treasury Inflation-Protected Securities(Tips).
- Short-term bonds.
- Real estate.
What is the best investment during inflation?
“TIPS are by far the finest inflation hedge for the average investor,” TIPS bonds pay fixed-rate interest twice a year and have maturities of 5, 10, and 30 years. At maturity, investors are paid either the modified or the original principal, whichever is greater.
The Inflation Reduction Act reduces the cost of prescription drugs, health care, and energy. It is the most aggressive step in American history to address the climate problem, and it will lift up American workers and generate good-paying, union jobs across the country.
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