On Monday, Piper Sandler adjusted its financial outlook for Sunnova Energy International Inc . (NYSE:NYSE:NOVA), a leading residential solar and energy storage service provider. The firm's analyst reduced the price target on the company's shares to $14.00 from the previous $26.00, while maintaining an Overweight rating.
The decision to lower the price target was explained as a measure to incorporate a significant risk factor into the valuation of future projects. This approach aims to align the price target with the generally accepted accounting principles (GAAP) derived tangible book value per share (TBVPS). The analyst emphasized that the revised price target was set with the intention of using a price target that is in line with GAAP derived TBVPS.
In determining the new price target, Piper Sandler continued to employ a net present value (NPV) model that includes a weighted average cost of capital (WACC) of 7.25% and does not account for renewal credit, which was set at 0%. This model is used to estimate the current value of the company's future cash flows.
Sunnova's financial performance and future projections are critical for investors, and the adjustment of the price target reflects a more conservative valuation approach by Piper Sandler. Despite the reduction in the price target, the firm maintains a positive outlook on Sunnova, as indicated by the continuation of the Overweight rating.
The Overweight rating suggests that Piper Sandler's analyst believes Sunnova's stock has a better value proposition compared to others in the industry, even in light of the newly adjusted price target.
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