By Sam Boughedda
A Piper Sandler analyst downgraded Sunnova Energy International Inc . (NYSE:NOVA) and Sunrun (NASDAQ:RUN) to Neutral from Overweight on Tuesday.
The analyst cut Sunnova's price target to $23 from $27 per share and Sunrun's price target to $29 from $35, telling investors in a note that heading into next year, they believe solar could prove more resilient.
"With BBB now twice deceased, we believe investor focus will return to evaluating our coverage under a recessionary lens (our macro group believes recession begins during 2H'22). Broadly, project lead times within the sector suggest less risk for '22 expectations with more risk manifesting next year," said the analyst. "Entering '23, we believe US Utility-scale solar could prove relatively more resilient, anticipate US resi solar growth deceleration, and remain optimistic on Europe's demand for non-Russian energy supply."
However, the analyst added that within the uncertain economic environment, they are biased toward balance sheet strength, companies with potential for favorable long-term earnings revisions, and/or free cash flow generation.
"We downgrade RUN+NOVA to Neutral from OW as we have lower confidence surrounding their levered cash generation trajectory and struggle with catalysts capable of propelling the stocks meaningfully higher within a risk-off environment."