Citi Upgrades Sunnova (NOVA) to Buy 'entirely on valuation'

Citi analyst Ryan Levine upgraded Sunnova (NYSE: NOVA) from Neutral to Buy with a price target of $14.00 (from $22.00).

The analyst comments "We upgrade NOVA to Buy entirely on valuation. The stock is down 55% since 7/19, and now reflects net customer value discounted at 12% without any credit for DevCo, which appears to be the worst-case scenario. To put this in perspective, the implied discount rate (excluding renewals and Devco value) on customer value is higher than cost of equity of the company derived using CAPM. As a result, even discounting the customer value at highest cost of capital in the capital stack indicates that the stock is close to valuation floor. We also believe that significantly higher Y/Y investment in 2024 and associated corporate capital needs have not been well-received by the market. Especially, in a shrinking margin environment. We expect NOVA to roll back projected investments in new systems in 2024. We currently model ~$4.5B of investments in new systems in 2024, which is lower than previous guidance of $5.5B. This should meaningfully reduce the need for ~$500mm of corporate capital highlighted by the company."

For an analyst ratings summary and ratings history on Sunnova click here. For more ratings news on Sunnova click here.

Shares of Sunnova closed at $10.53 yesterday.

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