Sunnova Energy Poised To Gain Market Share Faster As Industry Shifts Towards Leases From Loans: Analyst

Mizuho Securities analyst Maheep Mandloi initiated coverage on Sunnova Energy International Inc NOVA with a Buy rating and a $20 price target.

The analyst is bullish on NOVA's ability to capture market share amid a weak environment amid higher interest rates.

Mandloi expects the company to gain share faster than the market through FY26 on strong demand for their lease/PPA offering as the industry switches from loans to leases and IRA tax credit adders benefiting leasing economics. 

Moreover, the analyst expects NOVA's unique dealer strategy vs. its peers to enable it to quickly onboard new installers and aid the company in increasing new customer additions at >30% Y/Y in FY24 (vs. estimated market slowdown by -8% Y/Y).

Mandloi projects NOVA's fully burdened unlevered IRRs to increase in FY24 as electric bills remain flattish (or continue to rise), while solar equipment costs are expected to decline on improved availability of modules/inverter/ batteries. 

Overall, the analyst anticipates solar demand in California to decline in FY24 as the state lowers solar export rates, while growth in battery storage deployment should partially offset a decline in solar volumes.

Mandloi sees Net Earning Assets of $8.886 billion in FY23, $12.949 billion in FY24 and $17.274 billion in FY25.

Also Read: Residential Solar Market Struggles: Analyst Highlights Policy Shifts And Rates Curbing US Growth

Price Action: NOVA shares are trading lower by 4.18% at $10.54 on the last check Tuesday.