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Truist upgrades Sunnova, Enphase on global energy trends

Truist upgraded solar stocks Sunnova Energy (NOVA) and Enphase Energy (ENPH) to "Buy" ratings from "Hold" on Tuesday, expressing optimism around strengthening global demand trends. The firm sees an opportunity to buy into the solar names at attractive levels after the recent industry sell-offs.

However, Truist also downgraded fuel cell maker Bloom Energy (BE) based on political uncertainty posing risks to green energy initiatives.

Yahoo Finance's Rachelle Akuffo and Akiko Fujita break down the details.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

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Editor's note: This article was written by Angel Smith

Video transcript

RACHELLE AKUFFO: Starting with Sunnova and Enphase both getting upgraded by the analyst to buy from hold, saying that they see global demand levels improving. Amid the recent sell off in solar stocks, Truist sees opportunity to buy into these names. I thought this was interesting. They said that they saw meaningful upside opportunity moving into this Fed rate-cut cycle whenever that does kick off and really focusing on residential solar and then really actually saw some incremental downside risk to some of these more nascent technologies like hydrogen fuel cells.

Something else I found interesting when they were talking about the political implications as something they were watching. Because a lot of people assume that if power does go back to the GOP might see everything to do with the Inflation Reduction Act either reversed or cut back. But they said some of the more deeply-ingrained sectors, utility scale solar and biofuels have less risk of being affected there. So some interesting upside in some sector-- in a sector that's really been beaten up over the past year.

AKIKO FUJITA: Yeah, it's been a tough environment for sustainability stocks overall. When you think about some of these technologies, they are incredibly capital intensive. In a high-rate environment, that doesn't necessarily bode well. So as you pointed out, the expectation of Fed rate cuts certainly going to be a positive for some of these names.

You mentioned the political risks that could potentially inject themselves into these stocks. Bloom Energy, one that got a downgrade from Truist, the analysts saying political uncertainty, industries like green hydrogen are a higher risk for policy reform. And if you want to hone in specifically on what that policy is, Rachelle, there is concern here among those who are in some of these stocks about what a potential Trump presidency could mean for the green path ahead for these companies. If you think about the Inflation Reduction Act, the incredible amount of subsidies that are put aside there, there are concerns that could get pulled back in a significant way under a Republican administration.

Specifically though to your point, the concern is not necessarily around solar and some of these other renewable energy companies that have already really seen adoption on a larger scale. It is about the more nascent technologies, to your point Bloom Energy competing in hydrogen. Green hydrogen still incredibly expensive and not necessarily seeing mass adoption just yet. So one that we're watching there. Bloom Energy down, by the way, about almost 3% today.