The increasing awareness regarding global warming and climate change has caused the world to continue shifting towards clean and renewable energy. Governments around the world are pouring billions into the renewables sector to reduce their carbon footprint. Harms caused by fossil fuels, besides their diminishing supply, are another factor contributing to it. A further propeller recently has been the impact of Russia’s invasion of Ukraine. The countries which largely depend on Russian energy products supply now have resorted to other means to fulfill the gap created by the sanctions. Thus, it has resulted in accelerated investments and the adoption of renewable energy in order to reduce dependence on Russian oil and gas. Even the European Commission has set a goal to have half of the EU’s energy coming from renewable sources by 2030, according to its new RepowerEU plan. The global renewable energy market is projected to reach $1.97 trillion by 2030. The market is expected to register a CAGR of 8.4% between 2021 and 2030.
Clean energy stocks have had a torrid year so far into 2022, largely due to macroeconomic conditions. Inflationary pressure, supply chain hurdles, and Covid’s resurgence as well as hiking interest rates impacted the stocks as it did the rest of the equities this year. The iShares S&P Global Clean Energy Index ETF is down 5.6% year to date while Nasdaq is squared in the bear market and S&P 500 is just above it. But this kind of market behavior also brings forth opportunities for savvy investors with a stomach for digesting some risk. Plenty of sound stocks tend to lose share value amid such times as they get carried away with the market currents. Thus, it provides great entry points for stocks far below their actual value with brilliant future prospects. One such clean energy play with good long-term potential is Sunnova Energy International Inc. (NOVA).
NOVA provides energy and energy storage in the residential solar market. The company provides products and solutions through each step of the solar installation and maintenance process, as much as insurance and financing plans. As of the end of Q1 2022, the company had more than 915 dealers and sub-dealers across 37 states with over 207,000 customers.
The stock is currently down over 28% year to date while the past three months have been relatively better with 0.50% in the green. As per the pre-market data on June 1, 2022, the stock was priced at $20.00 at the last check.
Recently, Northland Securities analyst initiated coverage of the stock with an Outperform rating and a price target of $30.00 per share. The analyst Abhishek Sinha thinks that NOVA presents a nice entry point for interest investors and his price target comes with an upside of over 45% from the current. Furthermore, Truist also maintains a buy rating for the stock, which resumed its coverage early in May.
Let’s have a look at the financial profile of the company:
The company’s peak earnings quarter is usually Q3 as its late summer months, however, its Q1 2022 was also very impressive. In the first quarter of 2022, the company reported a revenue jump of 59% YOY. The quarterly revenues of $65.72 million surpassed the consensus estimate by 0.84%.
The company added 15,300 customers in the quarter and reduced its net loss from $24.1 million to $20.6 million. Hence, the resulting loss per share of $0.30 beat the consensus estimate of 38 cents per share for the quarter.
Despite the net loss, the NOVA had a solid cash position at the end of the quarter with its cash assets restricted and unrestricted, totaling $325 million.
For the full year 2022, the company is expecting customer additions of 85,000 to 89,000. The adjusted EBITDA is pegged at $117-$137 million for the year. Additionally, analysts are expecting an earnings loss of $1.05 per share on revenues of $346.7 million for the full year.
The company’s Triple-Double Triple Plan for the future (as seen below) suggests strong momentum over the upcoming years.
NOVA has a vast market opportunity and the right plans in motion to capitalize on it. The global solar energy market was valued at $52.5 billion in 2018 and is expected to grow at a CAGR of 20.5% between 2019 and 2026. The projected reach of the market is $223.3 billion by 2026. With such huge market potential, the green energy company is poised for much gains in the future as it continues to expand and grow. Given the buy and outperform ratings from analysts, it seems to be the best time to buy the stock when it is down YTD due to external market factors.