UBS thinks it’s time for investors to buy Sunnova Energy . Analyst William Grippin initiated coverage of the residential solar company with a buy rating and a $16 price target, which implies shares could gain 52.8% from Friday’s close. “We see NOVA as well-positioned to take market share driven by increasing demand for third-party-owned (TPO) residential solar systems which have relatively more favorable tax treatment under the Inflation Reduction Act,” Grippin said in a Monday note. Sunnova shares have struggled over the past year, losing more than 50%. Those losses, driven by market growth worries and rising interest rates, offer a buying opportunity for investors, the analyst said. NOVA 1Y mountain NOVA in past year Sunnova has a couple key catalysts, Grippin said. Those include the ongoing release of state-level solar approvals data and recognition of ITC additions on new installations, potentially in the second half of 2023. The federal government provides ITC, or investment tax credits , to advance solar energy adoption through efforts that offset the upfront costs of solar installations, making solar energy more accessible for businesses and individuals. UBS estimated that Sunnova will capture 40%-50% effective ITC on roughly 25% of its installations, expecting the energy company to “maintain its position as a top 3 residential solar player and to take share from cash & loan focused regional installers.” The key risk to the firm’s outlook, however, is anticipating earlier growth given the weak residential solar outlook for the second half of this year outlined during the company’s second-quarter earnings calls. “We expected overall U.S. residential y/y solar growth to trough in 1H24,” Grippin said. “However, on a 12-mo forward view, the residential solar market looks set for a recovery by 2H24, particularly if consumer funding costs ease.” Shares rose 3% in the premarket. — CNBC’s Michael Bloom contributed to the report.
