Notable forces are driving the increasing demand for electric power: The electrification of the economy, accelerated AI innovation, onshoring of manufacturing, and the proliferation of electric vehicles. This puts considerable pressure on the aging grid infrastructure and positions clean energy companies like Sunnova Energy International (NYSE:NOVA) with vast growth potential.
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Despite that, the stock is down over 65% year-to-date, and recent revenue challenges and the ongoing cash burn are a cause for concern. The shares trade at a discount, suggesting a potential value trade, but investors may want to hold off until the company can demonstrate more positive results.
Sunnova Expands With Home Depot Agreement
Sunnova Energy International is an energy services company dedicated to enhancing the accessibility, reliability, and affordability of clean energy for homeowners and businesses.
Sunnova recently announced a significant move in its strategic partnership with The Home Depot (NYSE:HD). This alliance positions Sunnova as the exclusive solar and battery storage service provider in Home Depot stores throughout the U.S. and its territories. This unprecedented agreement exposes consumers to Sunnova’s Adaptive Home energy services in over 2,000 Home Depot locations.
Financial Results & Sunnova’s Future Outlook
Sunnova recently announced financial results for the first quarter of 2024. The company added 27,000 new customers, lifting the total customer count to 438,500. However, the company reported revenue of $160.9 million, missing analyst expectations by $32.64 million and marking a decrease compared to $161.7 million in the same period last year. This was primarily attributed to a drop of $36.3 million in inventory sales revenue and a decrease of $2.8 million in service revenue. Despite this, Sunnova mitigated these losses with an increase of $37.3 million in revenue from their core adaptive energy customers.
Sunnova reported a net loss of $90.1 million for the first quarter, significantly lower than the net loss of $110.3 million in the same period in 2023. This was mainly due to income tax benefits from ITC sales and an increase in interest income from a larger customer loan portfolio. However, this was partially offset by higher operational and administrative expenses. The reported earnings per share (EPS) of -$0.57 beat expectations by $0.24.
As of March 31, 2024, Sunnova had total cash assets of $487.5 million. Management has reaffirmed its guidance for 2024. It anticipates customer additions between 140,000 and 150,000. The projected Adjusted EBITDA is expected to range from $350 million to $450 million. The interest income is estimated to be between $150 million and $190 million. Lastly, the proceeds from customer notes receivable and investments in solar receivables are projected to reach between $210 million and $250 million.
What Is the Price Target for NOVA Stock?
Analysts following the company have taken a cautious tone on the stock recently, with many lowering their share price target. For example, Piper Sandler analyst Kashy Harrison recently downgraded the rating on the shares to Neutral from Overweight with a price target of $4.50, citing a lack of conviction on consistent positive cash generation beyond 2024.
Overall, Sunnova is rated a Moderate Buy based on the ratings and price targets assigned by 21 Wall Street analysts over the past three months. The average price target for NOVA stock is $11.39, representing an upside of 118.20% from current levels. Yet, if the recent trend of lowered price target estimates continues, expect this average to turn downward.
The stock has been highly volatile over the past three months, as it shed -24.35%. Shares trade at the lower end of the 52-week price range of $3.37-$24.56, having shown some signs of life recently and now demonstrating positive price momentum, trading above the 20-day (4.51) and 50-day (4.99) moving averages. The P/S ratio of 0.87x is roughly half that of the Solar industry average of 7.77x, suggesting shares trade at a relative discount.
Final Thoughts on NOVA
There are things to like about Sunnova Energy International- attractive market trends and the strategic alliance with The Home Depot, chief among them. However, recent financial results reveal revenue challenges and considerable cash burn, calling for cautious investment until signs of improvement occur. Its stock trades at a discount, suggesting a potential value trade, but investors may want to wait for more consistent positive results.
