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Sunnova Energy has managed to outperform its peers despite tough macro conditions, but BMO thinks it’s time for investors to trim their exposure to the stock. Analyst Ameet Thakkar lowered his rating on Sunnova to market perform from outperform. He also trimmed his price target on shares to $25 from $27. The new price target implies 10.7% upside from Thursday’s close. The residential solar panel company has outperformed both the Invesco Solar ETF and the S&P 500 in 2023. Sunnova shares are up 25%, while the fund has lost 2%. The S&P 500 is up 18% year to date. NOVA YTD mountain Sunnova Energy shares “We remain constructive on NOVA and residential solar growth in the US longer-term. That said, the macro backdrop for US residential solar remains challenging,” Thakkar wrote in a Friday note. He noted that although dealer growth has allowed Sunnova to add customers despite less overall demand for residential solar power, the impact from that could wane over time. Dealer growth has been a key driver of success in a difficult environment. Growth in NOVA’s dealer network has accelerated in recent periods as higher interest rates make smaller solar installation companies more amenable to joining NOVA’s platform, in part to offer solar leases rather than 100 % reliance on solar loans,” said Thakkar. “However, with NOVA’s dealer count as of 1Q 2023 reaching nearly 1,400 we believe future additions may not yield as much capacity growth per dealer.” The analyst also expressed caution that the company’s debt issues, amounting to approximately $1.7 billion in asset-backed securities (ABS) issued since 2022, could weigh upon the stock. Treasury yields have risen 50 to 60 points higher than when Sunnova last issued ABS financing at a blended yield of 6.5%, Thakkar noted. Shares declined 2.1% Friday before the bell. The company is scheduled to report its quarterly earnings next week. —CNBC’s Michael Bloom contributed to this report.
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