On Thursday, Sunnova Energy International Inc . (NYSE: NYSE:NOVA) maintained its Buy rating and a stable $20.00 price target from Roth/MKM. The firm's assessment followed the pricing of Sunnova's second Department of Energy-backed Hestia loan asset-backed security (ABS) on May 22, which exhibited notable improvements in terms and spreads compared to previous issuances.
The AAA-tranche of the Hestia loan ABS, backed by the Department of Energy, achieved a weighted-average spread of approximately 167 basis points (bps), tightening by 25bps from the first Hestia ABS in November 2023. Additionally, the smaller BB-tranche spread saw a significant improvement of 75bps.
This latest financial move by Sunnova has shown a marked improvement in terms of cost of capital. The weighted-average spreads improved by around 55bps when compared to the company's most recent loan ABS from February. Moreover, the weighted-average yield has decreased to just 6.1% from 6.9% since November, indicating an approximate 80bps enhancement in yield.
The firm also highlighted that Sunnova's advance rates have seen an uptick, rising to about 65% compared to 59% from the first Hestia ABS. This improvement in advance rates could potentially reflect a stronger financial position or increased confidence in Sunnova's loan ABS structure.
InvestingPro Insights
As Sunnova Energy International Inc. (NYSE: NOVA) continues to navigate the complexities of the renewable energy market, real-time data from InvestingPro offers insights that could be crucial for investors. With a market capitalization of $559.16 million, Sunnova exhibits a Price / Book ratio of 0.35 as of Q1 2024, suggesting the stock might be undervalued relative to its assets. Additionally, the company has experienced a revenue growth of 10.13% over the last twelve months leading up to Q1 2024, indicating a positive sales trajectory.
However, investors should be aware of the significant challenges the company faces. Sunnova operates with a notable debt burden, and analysts have expressed concerns over the company's ability to make interest payments on its debt. Moreover, the company's stock price has experienced considerable volatility, with a 38.05% decline over the last three months and a 61.12% drop over the last six months as of mid-2024. Despite these challenges, Sunnova has seen a significant return over the last week, with a 10.81% price total return.
For those considering an investment in Sunnova, two InvestingPro Tips are particularly pertinent: the company's trading at a low Price / Book multiple may indicate a potential undervaluation, and despite the volatility, analysts anticipate sales growth in the current year. For a deeper dive into Sunnova's financial health and future prospects, investors can explore additional metrics and tips available on InvestingPro, including 15 more tips for NOVA. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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