With apprehensions that the economy could be headed for a recession, investors may be on the lookout for companies that can do well despite the deteriorating macroeconomic environment. Raymond James has one choice in the clean energy industry: Itron. Located in the Spokane, Washington suburb, Itron has “one of the least financially sensitive revenue streams among clean tech companies, and it’s in the context of a location that has the potential for GDP dynamics across the board.” There is minimal correlation,” analysts led by Pavel Molchanov said in a note to clients on Friday. Itron supplies smart meters and sensors, working with utilities to help them better understand consumption practices, and monitor supply and demand through a constant flow of data. This improves operational efficiency and enhances grid reliability. Shares of the company are down more than 30% for 2022, coupled with a broad market sell-off, particularly hard in growth-oriented areas of the market. But Raymond James said the reason for Etron’s decline has changed. The weakness at the beginning of the year was due to supply chain constraints and inadequate supply of electrical components. Now, investors are concerned about the risks posed by the broader macroeconomic environment. Raymond James said both of these cannot be true at the same time: “Either (1) demand is strong and supply chain complexities persist, or (2) demand is weak and the supply chain’s silver lining It’s loose.” Molchanov notes that utility companies’ spending on services like smart meters is based on regulatory decisions rather than on the pace of economic growth. “It is practically unheard of for utilities to change their capital expenditure plans, whether up or down, due to short-term economic conditions,” the firm said. Raymond James noted that during the financial crisis, Etron’s US revenue was stalled. According to the bank, in 2007, iTron recorded sales of $597 million in the US, which increased to $607 million in 2009. “Even during the worst economic backdrop in more than 60 years, U.S. sales of Itron remained fundamentally stable,” the firm said. According to FactSet, Molchanov bought Etron with a $72 price target, versus Wall Street’s average price target of $64.
