Electrification of Everything: 3 Stocks to Buy for Escalating Power Demands

The U.S.  Energy Information Administration (EIA) predicts that the nation’s power use will climb to 4,000 billion kilowatt-hours (kWh) in 2024 and 4,128 billion kWh in 2025, up from 4,000 billion kWH in 2023. Even more importantly, peak demand is expected to jump to 38 gigawatts in the next five years, while the grid is “not prepared for significant load growth,” according to Grid Strategies. The latter company, which describes itself as “a power sector” consulting firm, also noted that America’s electricity demand is now expected to climb 4.7% in the next five years, versus the estimate in 2022 of a 2.6% gain during the same time frame. With this power consumption increase, there are certainly some electricity stocks to buy that you should grab.

Meanwhile, the system also suffers from “Low transfer capability between regions.” Thus, moving electricity between regions may not be a viable means of meeting demand increases. Among the factors behind the faster-than-expected demand increase are the proliferation of data centers and the electrification of transportation. American companies that facilitate the generation and transportation of electricity should outperform in the longer term. Here are three stocks to buy to benefit from this trend.

Electricity Stocks to Buy: American Superconductor (AMSC)

a machine manufactures semiconductor chips in a factory setting. AI Semiconductor Stocks

Source: Shutterstock

As I’ve noted in previous columns, “American Superconductor’s (NASDAQ:AMSC) products are used to regulate electrical currents.” As a result, the firm is getting a big boost from the rapid growth of its customers in electricity-intensive industries. This includes chip makers, the military, metal miners, and electric utilities. The firm also generates a significant amount of its revenue from renewable-energy projects.

Last quarter, the revenue generated by the company’s Grid unit climbed to $34.2 million. This was up from $28.3 million during the same period a year earlier. The Grid unit is dominated by its electricity-regulating products. Meanwhile, its overall gross profit surged to $10.4 million, versus $3.8 million during the same quarter a year earlier.

CEO Daniel McGahn reported that the firms which use American Superconductor’s electricity-regulating products are “pushing” for quicker shipping.

Analysts, on average, expect the company’s earnings per share to jump to 36 cents next year. This is up from 10 cents in 2024.

Entergy (ETR)

Entergy sign at their headquarters in New Orleans

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Entergy (NYSE:ETR) was identified by research firm Morningstar for being best positioned to benefit from the “data center boom.”

“Entergy’s growing, energy-hungry customer base and constructive rate regulation in the U.S. southeast give the company a long runway of earnings and dividend growth potential,” Morningstar wrote.

Morningstar expects the utility’s industrial customers to be willing to pay for the huge investments that Entergy has to make. These investments are needed to boost its electricity production. Morningstar’s utility customers account for roughly 50% of its custmer base. As a result Morningstar predicts that the utility’s profits will climb 7%-8% annually for the next several years.

Morningstar estimates that Entergy’s fair value is $123 per share, well above the stock’s current level of about $106. Moreover, the shares’ 4.2% dividend yield make it a good choice for investors seeking both income and capital appreciation.

Quanta Services (PWR)

neon pink and blue graphic of a lightning bolt

Source: shutterstock.com/wacomka

Quanta (NYSE:PWR)is a contractor that enables electric utilities to expand their operations, and it has a market share of 16% in the sector. That makes it the leading firm in the space.

The company is leading the construction of SunZia Transmission and SunZia Wind. The physical development of the $11 billion project, which involves the creation of wind energy in New Mexico and transmission of the resulting electricity to Arizona, got under way in January.

Last quarter, Quanta’s top line jumped 13.5% versus the same period a year earlier to $5 billion while its operating income advanced to $155 million from $125.86 millio nduring the same period a year earlier. As of the end of Q1, Quanta had a mammoth backlog of $29.9 billion.

Analysts, on average, expect the firm’s earnings per share to jump to $9.72 in 2025 from the $7.16 of EPS that it generated in 2023.

Quanta’s strong growth and excellent outlook make it one of the best stocks to buy in the power sector.

On the date of publication, Larry Ramer held a long position in AMSC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.    

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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