FY24 Election Is A Major Game Changer For US Renewable Sector: Piper Analyst

Piper Sandler analyst Kashy Harrison revised the rating on several Renewables & Alternative Energy companies.

The analyst sees benefits accruing to the installers initially (FY24) and inverters eventually (FY25), with the rest of the stock in the coverage benefiting in the long term.

Consequently, Harrison upgraded both Sunnova Energy International Inc NOVA and Sunrun Inc RUN to Overweight from Neutral rating at an increased price target of $26 (from $13) and $31 ($15), respectively.

However, the analyst anticipates negative risk/reward from the FY24 election on the renewable sector as Piper's Macro Team believes that if Biden wins, he won't be able to expand the IRA, and if Trump wins, pieces of the IRA may be repealed (expanded EV credits).

By sub-sectors, the analyst expects growth from utility-levered companies and a decline in the U.S. residential sector before recovering later in FY24 and projects risk for U.S. green hydrogen. 

In particular, the analyst anticipates a 20-ish% decline in installs owing to weakness in California, lower credit spreads, and panel prices, which could reduce the cost of solar to 14c/KWh by mid'24 (down from 17c/KWh in '23).

On the other hand, the analyst anticipates another year of solid growth for solar (tracker shipments: >15% y/y) and storage (FLNC/STEM: +49%) but sees continued stagnation for onshore domestic wind. 

Consequently, Harrison downgraded Array Technologies Inc ARRY given valuation and domestic share loss and SolarEdge Technologies Inc SEDG on fair valuation following earning to Neutral from Overweight. The price target is also reduced to $22 (from $26) and $105 (from $110), respectively. 

Moreover, the analyst lowered the rating on Plug Power Inc PLUG to Underweight from Neutral and cut the target to $2.30 from $6.50.

Photo via Sunnova