On Wednesday, Baird, a global financial services firm, adjusted its outlook for Sunnova (NYSE:NOVA) stock, a residential solar and energy storage service provider. The firm's analyst has reduced the price target on the company's shares to $9.00, down from the previous $12.00. Currently trading at $4.20, the stock has fallen significantly from its 52-week high of $16.36.
Despite the decrease, Baird continues to maintain an Outperform rating on Sunnova's stock. According to InvestingPro analysis, the company currently appears undervalued based on its Fair Value assessment.
The adjustment in the price target reflects growing uncertainty around the Investment Tax Credit ( ITC (NS:ITC)) sales due to changes in the U.S. administration's policies.
The analyst from Baird noted that this new price target is set by applying approximately a 19 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple on their 2025 estimates.
With revenue growth of 12.2% in the last twelve months and a market capitalization of $525 million, this valuation is intended to balance Sunnova's growth potential and its contracted customer base against the backdrop of a slowdown in the U.S. residential solar market.
Baird's analysis suggests that while direct comparisons are limited due to the unique nature of Sunnova's business, the Net Contracted Customer Value (NCCV) per share stands at approximately $23. This figure highlights the value of the contracted customers that Sunnova has secured.
The reduced price target comes as the solar industry faces new challenges and uncertainties, particularly in light of policy shifts that could affect sales and growth trajectories. Sunnova, like other companies in the sector, is navigating these changes while managing a significant debt burden, with a debt-to-equity ratio of 4.67. InvestingPro subscribers have access to 16 additional ProTips and a comprehensive Research Report that provides deeper insights into Sunnova's financial position and growth prospects.
Sunnova's stock performance and future prospects will likely be influenced by how the company and the broader industry adapt to the evolving policy landscape. With an overall Financial Health Score rated as "Weak" by InvestingPro, investors and stakeholders in the renewable energy sector are keeping a close eye on these developments as they unfold.
In other recent news, Sunnova Energy International Inc (NYSE:NOVA). reported a 19% increase in third-quarter earnings, with revenue reaching $235 million. This growth was driven by a 30% rise in customer numbers. The company also reaffirmed its ambitious cash generation goals, aiming for $100 million in 2024, $350 million in 2025, and $400 million in 2026.
However, BMO (TSX:BMO) Capital Markets revised its outlook on Sunnova, reducing the company's price target from $10.00 to $8.00, while maintaining a Market Perform rating on the stock. This followed the company's earnings call highlighting challenges in cash generation and managing the company's $975 million in debt maturities.
In a separate development, Sunnova announced the resignation of Nora Brownell from its Board of Directors, effective December 31, 2024. The company stated that her resignation is not related to any disagreements regarding Sunnova's operations, policies, or practices. Following this, the Board decided to accelerate the vesting of a pro-rata portion of her restricted stock unit award.
Furthermore, Sunnova has partnered with the Penobscot Nation to install a half-megawatt battery energy storage system. The microgrid aims to provide reliable power for the tribe's community and commerce facilities during grid disruptions, even without external grid support. These are some of the recent developments concerning Sunnova Energy International Inc.
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