By Senad Karaahmetovic
Analysts at Wolfe Research downgraded shares of Sunnova Energy (NYSE:) and Sunrun (NASDAQ:) to Peer Perform from Outperform, citing headwinds from rising interest rates.
Analysts see corporate tailwinds being offset by the higher rate environment. Analysts have previously noted that it is difficult for investors to hold residential solar stocks in a rising rate environment, which is “worsening”.
“This affects the valuation of all Clean Energy growth stocks (from a DCF value perspective), but Resi Solar companies are most exposed as their business requires frequent access to capital and pricing margin. offered by higher utility rates, which we expect to continue to increase. But we need to see signs of stabilization in the interest rate and credit markets,” the analysts said in a client note.
On RUN, analysts see a fair value between $24 and $29. Revenues are expected to be “solid”, they added. With respect to NOVA, a fair value is estimated between $18 and $23.
However, in this case, analysts expect a “disappointing third quarter report”. He also expects the company to guide down principal payments.
“We see these delays being due to the decline in unscheduled prepayments as mortgage refi activity has come to a halt and there is little incentive for customers to prepay low rate solar loans given the current state of mortgages. rates,” the analysts concluded.
Shares of NOVA are down 2% while shares of RUN are trading down 3.3% on pre-market Thursday.