Trump’s election caused a sell-off in clean energy stocks. But is this an opportunity for these two market leaders?

The election of Donald Trump on November 5 has already led investors to anticipate which stocks could win or lose over the next four years.

One immediate casualty is clean energy supplies. With a Trump White House and a likely Republican House and Senate, investors fear a repeal of the clean energy incentives introduced by the Biden administration’s Inflation Reduction Act (IRA).

Add to that concerns that Trump’s tariff and tax cut policies could fuel inflation, and it could be a perfect storm for clean energy stocks, which have already suffered from the high interest rate environment in recent years.

However, the current sell-off could also provide opportunities for certain clean energy stocks. It’s time for investors to take a serious look at these two high-quality market leaders who were thrown out with the bathwater.

Image source: Getty Images.

Why clean energy stocks might not have fared so badly in the Trump era

There are two reasons why clean energy stocks may not be as big a risk as initially thought under the new Trump administration.

First, while Republicans have captured Congress, many of the clean energy projects are actually in red districts. About 75% of the IRA’s spending and job creation has gone to red states or red counties within blue states.

While that fact certainly didn’t help Vice President Kamala Harris win the election, it could keep a complete repeal of those incentives at bay. In fact, 18 Republican lawmakers just sent a letter to House Speaker Mike Johnson warning against a complete repeal of the IRA given the benefits they see in their districts. Although Republicans will likely see a majority in the House of Representatives, the margin will likely be much smaller than 18 votes.

The second factor is Tesla CEO Elon Musk is a major Trump booster and donor. Musk is clearly a proponent of clean energy and will likely have some influence on how the new administration handles IRA incentives.

So while there could be some retreat around the edges of the policy, a complete withdrawal of the IRA and its incentives seems unlikely.

Rivaans

Rivaans (NASDAQ: RIVN)like many electric vehicle (EV) stocks, they sold off after the election. Still, the stock has largely recouped these losses following a generally positive update to the company’s outlook based on its recent third-quarter earnings results.

Rivian is a bit of a start-up, so it’s still losing money. But the high-end SUVs and electric vans are what it is made for Amazon have given the company two formidable niches in which it is currently successful.

Rivian’s high-end R1 SUV costs more than $70,000, so wealthier end customers may be less sensitive to high interest rates or the potential rollback of EV incentives coming from the Trump administration.

Plus, the company just closed a high-profile deal Volkswagen (OTC: VWAGY) in which Rivian will license its industry-leading software and hardware technology to a joint venture and in return receive up to $5.8 billion through 2027, which will help fund the 2026 first half launch of its R2 SUVs from 2026.

Rivian has also made progress in reducing raw material costs and capital expenditures, and even expects a positive gross margin in the fourth quarter. This is due to several legacy supplier contracts expiring as the new second-generation R1 platform ramps, which have a much lower cost structure.

While Rivian certainly still has a ways to go to reach overall profitability, achieving positive gross margin is a huge improvement over last year’s negative 40% gross margin. Moreover, the Volkswagen deal represents an important source of financing as there is still uncertainty about interest rates.

Overall, Rivian appears to have the high-profile partnerships, financing sources and margin improvements that EV brands need to survive and compete in the new environment.

Enphase

Just like other solar companies Enphase (NASDAQ: ENPH) has seen its share decimated after the elections. However, the stock has struggled since rates peaked in 2022, severely curtailing demand for rooftop solar.

Yet Enphase is a profitable market leader. Microinverter technology is applied to each panel of a system and is a superior choice to string inverters, which only convert power from all panels at once. The advantage of microinverters is that they increase the efficiency of the entire system, while string inverters are limited by the worst performing panel on a solar installation.

Micro inverters therefore have a higher price than string inverters. That’s allowed Enphase to remain profitable in recent years, even in an absolutely horrific rooftop solar environment. Compare Enphase’s results with its string inverter competitor SolarEdge:

ENPH revenue data (TTM) according to YCharts.

Enphase has taken even more proactive steps to maintain its profitability, recently laying off about 500 employees. While that’s unfortunate for these employees, it does show that management is being proactive in reducing costs and maintaining margin targets, even though Enphase is still profitable right now.

While revenue has declined significantly year over year, revenue and operating margins have improved sequentially in each of the past two quarters, as you can see in the top left and bottom right panels.

Image source: Enphase October 2024 presentation.

So while the market is still in a major down cycle, Enphase’s results show that it could be at a bottom. And because its profitability is better than all competitors, the company has the potential to outlast those that may go out of business, putting Enphase in a position to benefit from the next upcycle.

Now that Enphase shares have fallen to just 18.5 times next year’s earnings estimates and the share price has fallen back to levels not seen since 2020, this could be a good time for contrarian investors to dive in in this solar energy leader.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Billy Duberstein and/or his clients have positions with Amazon. The Motley Fool holds and recommends positions in Amazon, Enphase Energy, and Tesla. The Motley Fool recommends SolarEdge Technologies and Volkswagen Ag. The Motley Fool has a disclosure policy.