On Monday, B.Riley Financial adjusted its price target for Sunnova Energy International Inc . (NYSE:NOVA), reducing it to $15 from the previous $21, while continuing to endorse the stock with a Buy rating.
The firm acknowledges Sunnova's advantageous positioning within the competitive residential solar market, emphasizing the company's strategic focus on enhancing profitability and cash flow metrics in the years 2024-2025. However, despite Sunnova's efforts to throttle growth to improve financial performance, the anticipated benefits from platform leverage through increased cash generation and reduced operational expenses per customer have not yet materialized.
This has led to investors treating Sunnova similarly to its peers, waiting for more concrete results.
The company's management has reiterated that no corporate capital is needed until 2026, yet they also announced intentions to file a $100 million at-the-market (ATM) offering soon. This announcement has not been acted upon to date, likely due to the stock's underperformance, resulting in investor uncertainty regarding the company's liquidity.
Sunnova's management has committed to concentrating on profitability and cash generation while scaling back growth ambitions. The company is confident it will generate sufficient cash in 2024 to cover the working capital required for the year's growth.
Sunnova has also confirmed its full-year guidance for 2024, anticipating steady demand and improved market conditions. The guidance includes customer additions between 185,000 to 195,000, adjusted EBITDA of $350 to $450 million, interest payments received from solar loans ranging from $150 to $190 million, and principal payments received from solar loans between $210 to $250 million.
B.Riley continues to view Sunnova as a leader amongst its struggling residential solar sector peers, citing the company's improved pricing power and commitment to financial health as pivotal factors. The firm stresses the importance of Sunnova achieving more than a 20% reduction in customer costs and enhancing its levered cash position to a $200 to $500 million run-rate by the end of 2024, which is seen as crucial for maintaining a positive outlook and bolstering investor confidence.
InvestingPro Insights
For investors eyeing Sunnova Energy International Inc. (NYSE:NOVA) amidst the B.Riley Financial's recent price target adjustment, InvestingPro offers additional insights. Sunnova is currently grappling with a significant debt load, with concerns about its ability to service interest payments. This is particularly noteworthy as the company strives to improve profitability and cash flow, as highlighted by B.Riley. Moreover, with a market capitalization of $470.6 million and a negative P/E ratio reflecting its lack of profitability over the last twelve months, the financial health of Sunnova appears to be under scrutiny.
However, not all indicators are negative. Sunnova trades at a low Price / Book multiple of 0.31, which may attract investors looking for potential undervalued stocks. Additionally, analysts have forecasted sales growth for the current year, which could be a silver lining for the company's future revenue trajectory. It's important to note that while the stock has experienced significant price volatility recently, with a steep 78.94% drop in the one-year price total return, the InvestingPro Tips suggest that Sunnova's stock price movements tend to be quite volatile, indicating that this might not be out of the ordinary for the company.
Investors interested in a deeper dive into Sunnova's financials and future prospects can find a wealth of additional InvestingPro Tips by visiting InvestingPro’s dedicated NOVA page. There, you can explore 18 more tips that provide a comprehensive analysis of the company's financial state and market performance. To enhance your investment research with InvestingPro, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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