Oppenheimer believes a range of stocks, from electric vehicle favorites to solid waste collectors, could see short-term gains depending on which party prevails in this November’s presidential election. “As the 2024 election approaches, we expect the outcome of the presidential and congressional elections to influence several key issues affecting the companies we cover,” Oppenheimer analysts led by Colin Rusch wrote in a Thursday note to clients. “Medium-term stock price movements will likely be driven by longer-term trends affecting global demand, encouraging investors to be nimble on short-term sentiment.” Oppenheimer said key issues related to political economy are tax benefits and distribution of funds under the Inflation Control Act (IRA), corporate tax and manufacturing policy, regulatory changes in electricity, transportation and agriculture, and tariffs and trade policy. Ruch named several stocks as “best ideas” in both a Democratic sweep and a Republican sweep. He cited Sunrun, Ameresco and Green Plains as stocks likely to benefit from a Democratic administration, and Tesla, Republic Services and Caterpillar as stocks likely to benefit if Republicans win this year. Oppenheimer analysts said these stocks are just short-term ideas, inspired by catalysts related to the upcoming presidential election, and not part of the firm’s overall current top picks. Solar power company Sunrun could be a big beneficiary of a Democratic sweep, according to Ruch. That’s mainly because panel installer Sunrun could see project revenues increase due to the IRA’s domestic content “adders,” or incentives for renewable energy and infrastructure development, which give developers additional benefits for using domestic materials. “We see the continuation of domestic content and low-income adders as positive for project pricing and revenues.” [cash flow] Analysts have called Sunrun “potential to boost prices and margins by 10-15 percent,” and said in a May forecast that domestic content adders could contribute $90 million to $300 million to the company’s fiscal 2024 cash flow. Sunrun shares are down 2 percent so far this year, but have surged more than 62 percent this quarter, according to FactSet, as investors rallied on the company’s second-quarter earnings beat and installed storage capacity guidance, as well as hopes for high-value subscribers and low loan rates. Biofuel maker Green Plains is another stock that could benefit from IRA tax incentives, especially if the IRA expands support for renewable diesel and sustainable aviation fuels, as well as carbon sequestration and low-carbon intensity credits, Oppenheimer’s Kristen Owen said. The company processes renewable crops into fuels, industrial alcohol, syrups, proteins and feedstocks, according to the company’s website. Green Plains shares are down 46% this year, but FactSet, whose analysts are surveyed, believes the company’s shares could rise 44% from current levels over the next 12 months, based on consensus price targets. “GPRE is most directly exposed to changes in carbon intensity measurement and implementation of the 45Z tax credit,” Owen said. “We believe a Democratic sweep would make the current IRA 45Z deduction permanent, supporting demand for renewable diesel and sustainable aviation fuel.” Renewable energy company Ameresco could benefit from a stable implementation of IRA incentives if Democrats win, especially those related to its growing energy storage business, Oppenheimer said. The stock is up about 1% so far this year, but is up about 18% in the past month, recovering from an early August drop when the company lowered its profit outlook for the current fiscal year. EV company Tesla could rise with a Republican takeover, Oppenheimer said. “Given TSLA’s cost leadership and Elon Musk’s nurturing relationship with former President Trump, we expect the company to gain share as peers slow zero-emission investments and increase long-term cost leverage over competitors,” Rush said in a 52-page Oppenheimer report. The analyst added that Tesla is also one of the stocks most at risk due to changes to the $7,500 per vehicle incentive for new EV purchases by IRAs. Tesla has fallen more than 7% this year, but shares have recovered this quarter, up 16.3% through Thursday, driven by enthusiasm for the company’s advanced driver-assistance technology. Market confidence that interest rates will soon fall is also a tailwind for companies in the EV industry. TSLA 1Y Mountain Tesla Stock. Oppenheimer argued that Republic Services, a solid waste and recycling company, would be “the biggest beneficiary of continued favorable corporate tax policies” under a Republican administration. For example, the Alternative Fuel Blend Tax Credit, which gives solid waste management companies a cash tax credit for every time they substitute diesel or gasoline with compressed natural gas (CNG) or renewable natural gas (RNG), expires on Dec. 21. Oppenheimer said the credit has historically been renewed “on a staggered basis with retroactive application,” and Republic Services has modest exposure to RNG compared to its competitors. Republic Services shares have risen nearly 25% this year. The average price target of analysts surveyed by FactSet suggests the stock could rise another 5% over the next year. Meanwhile, Caterpillar could be a leader among industrial stocks if the Republicans win a sweeping Republican victory. The Texas-based company is “a bellwether for industrial activity, and we see favorable accelerated depreciation, lower corporate taxes and supportive reshoring/domestic industrial policies driving renewed support for the stock,” Owen said. “CAT also has significant earnings exposure to the traditional energy sector.”
Oppenheimer predicts a landslide victory for either the Republicans or Democrats
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