SunPower, Sunnova downgraded at Goldman on residential solar headwinds

Jun. 21, 2022 11:28 AM ETSunPower Corporation (SPWR), NOVA, RUNBy: Carl Surran, SA News Editor1 Comment

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SunPower Corp. (NASDAQ:SPWR) is downgraded to Sell from Neutral with a $13 price target, cut from $19, and Sunnova Energy (NYSE:NOVA) is cut to Neutral from Buy with a $24 PT, trimmed from $31, at Goldman Sachs on Tuesday, saying it is taking a more selective stance on residential solar in the face of potential headwinds.

Goldman's Brian Lee said he remains bullish in the long term on the structural growth case for residential solar in the U.S., but "it is prudent to take a more selective stance on the group in the current backdrop of heightened inflation and rising interest rates, which we believe could negatively impact the appetite for certain resi solar products."

SunPower (SPWR) is too exposed to cash and loan sales that account for ~90% of the company's overall volumes, Lee said, adding it derives a significant chunk of sales from installations in new homes, which could stall given the weakening demand for housing.

Sunnova (NOVA) shares are relatively inexpensive, but Lee thinks short-term growth could be hurt as ~50% of the company's sales come from cash and loan customers.

Buy-rated Sunrun (NASDAQ:RUN) is Goldman's "preferred way to play the resi solar theme given the company's improving execution on growth and margins."

SunPower's (SPWR) earnings trends have improved and positive free cash flow is expected over the coming years, but "the technical chart has a lot to prove," Mike Zaccardi writes in an analysis posted recently on Seeking Alpha.

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