On Friday, BMO Capital Markets adjusted its outlook on Sunnova Energy International Inc . (NYSE:NOVA), reducing the company's price target from $10.00 to $8.00 while keeping a Market Perform rating on the stock. The adjustment comes after the company's third-quarter earnings call, which according to the firm, presented few surprises.
The analyst from BMO Capital noted that the expected working capital build-up during the quarter led to cash burn and a challenging fourth quarter ahead for Sunnova to meet its cash generation goal of $100 million for the year 2024, a target that the company has reaffirmed. Additionally, Sunnova reiterated its cash generation guidance of $350 million for 2025 and $400 million for 2026. However, it was clarified that these figures are based on a 75% advanced rate.
Sunnova's management also discussed its strategy for managing the company's $975 million in debt maturities, indicating plans to utilize a combination of refinancings and retirements. BMO Capital highlighted the execution of this strategy as a key risk for the company.
In the statement provided by BMO Capital, the analyst emphasized the importance of Sunnova's execution in managing its debt obligations and maintaining its cash generation trajectory. This remains a pivotal factor for the firm's outlook on the stock, leading to the decision to maintain the Market Perform rating while lowering the price target to $8.00.
In other recent news, Sunnova Energy International Inc. reported a substantial year-over-year revenue increase in Q3 2024, reaching $235 million, a growth of 19%. This growth was driven by a 30% increase in customers, with the total count nearing 423,000. The company, which added 76,600 customers in the first nine months of 2024, successfully closed a $35 million tax capital fund in October and is on track to exceed its $100 million cash generation target for the year.
Sunnova's strategic shift towards positive cash generation is highlighted by their aim to reach $350 million in 2025 and $400 million in 2026. This cash positivity plan is supported by a reduction in operations and maintenance expenses by 48%, along with successful private securitization. The company also secured 10 debt financings and 4 tax equity financings in 2024 to meet future cash generation goals.
In terms of future expectations, Sunnova is projecting total gross customer additions for 2024 between 110,000 and 120,000. The company also anticipates generating at least $69 million in unrestricted cash by year-end. They are preparing for a 2025 fund and evaluating a Puerto Rican-only securitization.
InvestingPro Insights
Recent InvestingPro data offers additional context to BMO Capital's analysis of Sunnova Energy International Inc. (NYSE:NOVA). The company's market capitalization stands at $754.54 million, reflecting its current valuation in the market. Sunnova's revenue for the last twelve months as of Q3 2024 was $809.98 million, with a revenue growth of 12.18% over the same period. This growth aligns with the company's efforts to expand its operations and customer base.
Two key InvestingPro Tips are particularly relevant to the article's discussion on Sunnova's financial position. First, the company "operates with a significant debt burden," which corroborates BMO Capital's focus on Sunnova's strategy for managing its $975 million in debt maturities. Second, Sunnova is "quickly burning through cash," a point that resonates with the analyst's concerns about the company's ability to meet its cash generation goals.
These insights underscore the challenges Sunnova faces in balancing growth with financial stability. Investors considering NOVA stock may find value in exploring the additional 14 tips available on InvestingPro, which could provide a more comprehensive view of the company's financial health and market position.
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