Brookfield Renewable Corporation (NYSE: BEPC) stock price retreated on Friday after the company published mixed financial results. After jumping by over 6% on Thursday, the shares pared back some of those gains in the pre-market session. In all, the stock has dropped by more than 30% from its highest point this year.
Renewable stocks under pressureBrookfield Renewable Corporation is a big investor in the clean energy industry. The company has huge investments across most areas of renewable energy. It owns hydroelectric energy companies in North America, Brazil, and Colombia.
The company also has huge investments in wind and solar. As a result, its stock has struggled recently as investors have soured on these areas. For example, Siemens Energy shares have plunged after the company sought government guarantees.
Similarly, Vestas Wind Systems and Orsted have struggled as costs in the industry rose. Also, as I wrote on Thursday, companies in the solar energy industry like SunRun, SolarEdge, and Enphase Energy are all struggling.
Brookfield Renewable Corporation had a modest quarter even as the energy industry faced numerous headwinds. Its Funds From Operations (FFO) rose by 7% to $253 million, helped by its diversified business.
Its hydro business had FFO of $129 million while its wind and solar generated $145 million. Its distributed energy and sustainable solutions had $39 million.
There are several reasons to like BEPC stock. First, the company maintains a strong balance sheet, which is relatively immune to the ongoing high-interest rate environment. 90% of its total borrowings are at the project level and with no meaningful maturity in the next five years.
It also has a string credit rating and over $4.4 billion in available liquidity. Second, unlike companies like Vestas and Orsted, its business is highly diversified. This means that industries like hydro can offset the lower returns in wind and solar.
Further, the company has a track record of rewarding its shareholders. It has a forward yield of 5.2%, which is higher than most money market funds. As such, the likelihood for a dividend cut are relatively low. The CEO said:
“The prospects for our business are as strong as ever. Our recent investments are performing well and we are seeing historical levels of demand for our product, and with access to capital becoming increasingly scarce for some market participants, we are seeing many opportunities to invest significant capital at very attractive risk-adjusted returns.”
BEPC stock price forecast
Brookfield Renewable Corporation has been punished severely because of the changing sentiment in its industry. This guilty-by-association stance will likely continue as sentiment about the industry worsens.
Looking at the daily chart, we see that the BEPC stock price formed a cup and handle pattern, which is usually a bearish sign. The lower side of this pattern was at $26.40. The stock remains below the 50-day and 100-day moving averages.
Therefore, while BEPC is a good investment, I recommend patience for now. For now, the stock seems about to form a break and retest pattern by retesting the resistance at $26.40. As such, we can’t rule out a situation where the shares drop and retest the psychological level at $20.
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