Investors in Sunnova Energy have been facing a rough patch this year as the residential solar company’s stock price has plummeted by over 68%. However, there is still hope according to analyst Brian Lee from Goldman Sachs who has maintained a buy rating on the company with a price target of $14, indicating a potential 194% increase.
In a recent note, Lee highlighted the importance of Sunnova’s cash flows in the short to medium term and the need for the company to restore investor confidence. Despite being one of the most shorted names in the solar industry, Lee sees an opportunity for Sunnova to rally significantly with strategic actions.
One of the key factors for Sunnova to regain investor confidence and drive stock price recovery is the potential sale of assets, minimal cash burn, and repurchasing of debt. This could help the company stabilize its cash position and potentially generate more cash in the near term.
Additionally, Lee believes that Sunnova’s non-solar loan portfolio, including generators, EV chargers, and home security systems, could be an undervalued asset that could provide a source of value and cash flow. By focusing on higher pricing, cost control, and working capital adjustments, the company could maintain stable cash levels in the first quarter.
Looking ahead, Lee sees potential for Sunnova to generate cash from asset sales and eventually reach cash flow generation of $200 million to $500 million by 2025. This would allow the company to refinance its remaining debt and position itself for long-term success.
While Sunnova has faced challenges in the past year, Goldman Sachs remains optimistic about the company’s prospects and believes that strategic actions could lead to a significant turnaround in the stock price. Investors who have stuck with Sunnova through this rough patch could potentially see substantial returns in the future.
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