Susquehanna Sees an Attractive Risk-Reward For Residential Solar Names

Susquehanna initiated coverage of solar stocks Sunnova Energy International Inc. (NYSE: NOVA) and SunPower (NASDAQ: SPWR) with Positive ratings and price targets of $38 and $25, respectively.

Analyst Biju Perincheril said in a memo to clients that the firm also maintains a Positive rating and $40 price target on Sunrun (NASDAQ: RUN) as they believe the risk/reward in residential solar installation names "looks attractive with the recent weakness and IRA tailwinds for the sector.

"Resi solar outlook is strong. Despite some near-term frictions (higher equipment and financing costs, supply chain constraints, utility interconnection delays), residential solar demand remains very strong," wrote Perincheril. "Solar installations are on track to increase ~26% this year."

The current strength is aided by some pull forward in demand, according to the analyst, and given this dynamic and potential NEM changes in California, Susquehanna forecasts installation growth moderating to ~6% next year.

"However, we expect demand growth to reaccelerate starting in the back half of next year, driven by the benefits associated with the recently enacted Inflation Reduction Act (IRA)," Perincheril added.

By Sam Boughedda

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