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Sunrun (NASDAQ:RUN) and Sunnova Energy (NOVA) were downgraded Tuesday to Neutral from Buy with respective $13 and $12 price targets at Janney, which says U.S. residential solar demand is more uncertain than current expectations, and tailwinds of lower equipment costs and higher investment tax credit adders will be more subdued than previously expected.
Janney had upgraded Sunrun (RUN) to Buy following Q2 2023 earnings on the premise that margins would improve at a faster pace than investors expected due to equipment cost declines, labor efficiency and ITC adders, but “we were wrong,” analyst Thomas Meric says, “and while we remain bullish on margins moving higher, we are less confident in demand and furthermore, we think the stock will reflect this uncertainty.”
Regarding Sunnova (NOVA), Meric says investors are focused on potential dilution or liquidity impacts related to the company’s strategy for its 2026 convertible notes, but he believes there is still a healthy amount of time to refinance or pay down the notes, and the company has $3.7B in customer notes receivable that could be monetized through an asset sale.
