Sunnova Energy International Inc

Sunnova Energy International Inc. (NYSE: NOVA) is an energy services company. The Company partnering with local dealers and contractors who originate, design, and install its customer’s solar energy systems, energy storage systems and related products and services on its behalf. It also offers other sustainable home solutions, such as home security and monitoring, smart home devices, modern heating, ventilation, and air conditioning generators, upgraded roofing, water systems, water heaters, main panel upgrades and electric vehicle chargers.

Recent Business and Financial Updates

• Financial Guidance and Revenue Growth: Sunnova Energy International Inc. maintained its financial guidance for cash generation, setting targets of USD 100 million for 2024, USD 350 million for 2025, and USD 400 million for 2026. For the third quarter of 2024, the company achieved revenue of USD 235.3 million, reflecting a 19% increase from the same quarter in 2023. Sunnova also saw a rise in its investment tax credit rate, which increased from 40.7% in September 2024 to 42.2% in October. The company’s solar power generation capacity under management expanded to 2.9 gigawatts, while energy storage capacity grew to 1,556 megawatt hours as of September 30, 2024.
• Strategic Commentary from Leadership: CEO William J. (John) Berger highlighted Sunnova's robust third-quarter results and reaffirmed the company's strategic focus on cash generation as outlined at the beginning of 2024. Despite a decline in unrestricted cash due to seasonal working capital needs, Berger expressed confidence in meeting Sunnova’s year-end target, aided by tax capital proceeds received in early October and further asset-level capital anticipated later in the year. He also underscored expectations of reduced working capital needs, additional capital inflows, and a higher volume of assets going operational, all contributing to Sunnova’s multi-year cash generation potential.
• Core Revenue Performance for Three-Month Period: In the three months ending September 30, 2024, Sunnova’s customer agreements and incentives revenue rose by 46%, totaling an increase of USD 49.3 million compared to the previous year, driven by a larger number of solar energy systems in operation. Revenue per system grew as well, influenced by factors such as weather seasonality, system sizes, and the inclusion of storage components. Sunnova’s Power Purchase Agreement (PPA) and lease revenue per system increased by 13% year-over-year, as average system sizes grew, and battery attachment rates rose from 33% in 2023 to 40% in 2024.
• Product Sales and Revenue Shifts: During the same quarter, revenue from solar energy systems and product sales decreased by USD 12.5 million, largely due to Sunnova’s strategic shift away from non-core inventory sales and direct sales. Inventory sales revenue dropped by 44% as the company focused on its core business of providing energy services. However, cash sales revenue grew by 55%, driven by increased system sizes and higher storage inclusions, raising per-customer revenue significantly, from USD 14,285 in 2023 to USD 25,061 in 2024.
• Nine-Month Performance and Cost Management: For the nine-month period ending September 30, 2024, Sunnova’s customer agreements and incentives revenue saw a 43% increase, mainly due to the rise in solar energy systems under service agreements. PPA and lease revenue per system rose by 12%, driven by larger system sizes and an increase in battery attachments. Product sales revenue, however, declined by 13% due to reductions in inventory and direct sales revenue. Cash sales revenue saw a notable increase of 49%, attributable to an expanding customer base and greater demand for solar systems with storage.
• Operational Costs and Credit Loss Provisions: Sunnova's cost of revenue for customer agreements and incentives rose by 46% over the nine-month period, aligning with the revenue increase and driven by higher depreciation costs for solar and storage systems. Service-related costs, including credit checks and loan agreements, increased by 27% due to higher solar renewable energy credit costs. Additionally, the provision for expected credit losses dropped by 38%, resulting from lower loan originations and sales of certain accessory loans, while other operating expenses changed due to a USD 43.4 million loss on sales of customer notes receivable, partly offset by fair value adjustments.
• Liquidity, Interest Expense, and Tax Benefits: As of September 30, 2024, Sunnova held USD 473.9 million in cash, including USD 208.9 million in unrestricted funds, and had USD 1.0 billion in borrowing capacity available. Interest expenses increased by 94%, due to a rise in average debt levels and interest rates, while interest income also grew by 34% through an increase in loan agreements. Sunnova’s income tax benefit rose significantly, driven by investment tax credit sales. The net loss attributable to redeemable noncontrolling interests also grew, reflecting new tax equity funds added in recent years. These financial elements highlight Sunnova’s robust capital resources and strategic positioning to meet long-term growth and investment needs.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 32.75, currently downward trending recovering from oversold levels, with expectations of a consolidation or an upward momentum if USD 3.00-USD 3.30 support range holds. Additionally, the stock's current positioning is below both the 50-period SMA and 200-period SMA, which may serve as dynamic short to medium-term resistance levels.  

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Speculative Buy’ rating has been given for Sunnova Energy International Inc. (NYSE: NOVA) at the closing market price of USD 3.41 as of November 13, 2024. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is November 13, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.