UBS cuts Sunnova price target to $5, maintains Buy rating

On Wednesday, UBS analyst William Grippin adjusted the price target on Sunnova Energy International Inc . (NYSE:NOVA) shares, bringing it down to $5.00 from the previous $14.00. Despite this significant reduction, the firm continues to endorse a Buy rating for the stock. The stock currently trades at $2.45, near its 52-week low of $2.30, though InvestingPro analysis suggests the stock is undervalued at current levels.

Grippin’s decision to lower the price target for Sunnova reflects a broader contraction in market multiples for companies within the distributed solar sector. He bases the new $5.00 price target on an approximately 11 times multiple applied to the expected adjusted EBITDA for the period from the fourth quarter of 2025 to the third quarter of 2026. This calculation includes interest, principal, and receivable proceeds from solar loans, adjusted for net debt and minority interest. InvestingPro data reveals the company’s significant debt burden, with a debt-to-equity ratio of 4.67 and concerning financial health metrics.

The previous price target of $14.00 was founded on a 12 times multiple, indicating a recalibration in valuation assessments by UBS. Grippin highlighted that Sunnova’s valuation is highly sensitive to the multiple used due to the company’s substantial leverage. According to InvestingPro, the company maintains revenue growth of 12.18%, though its overall financial health score remains weak at 1.35 out of 5. Subscribers can access 20 additional ProTips and comprehensive financial metrics in the Pro Research Report.

The adjustment comes as the industry faces shifting financial landscapes, with peer companies experiencing similar revaluations. Sunnova, which specializes in residential solar and energy storage services, operates in a competitive and rapidly evolving market.

UBS’s maintained Buy rating suggests that, despite the lowered price target, the firm still sees potential in Sunnova’s business model and market position. This endorsement comes as the company navigates through an environment of changing market multiples and investor expectations.

In other recent news, Sunnova Energy International Inc. has been making strategic moves to enhance its operations and financial standing. The company has formed a partnership with OpenSolar to integrate advanced solar design software into the Sunnova Catalyst™ dealer platform. The collaboration aims to streamline solar project workflows and improve the efficiency of solar installations in the United States.

Simultaneously, Sunnova has been active on the financial front, amending credit agreement terms through its subsidiary, Sunnova EZ-Own Portfolio, LLC. The changes include a revision of the "Liquidity Reserve Account Required Balance" definition and the introduction of a default event if 95% of eligible solar loans are not transacted within 60 days from the amendment’s effective date.

Analysts have been keeping a close eye on Sunnova’s financial maneuvers. Jefferies analyst Julien Dumoulin-Smith adjusted the price target for Sunnova, reducing it to $9.00 from the previous $13.00, while retaining a Buy rating on the shares. The adjustment reflects the company’s focus on generating sustainable cash flow and improving its debt situation. On the other hand, TD Cowen initiated coverage of Sunnova with a Hold rating and a price target set at $5.00, citing concerns about the company’s upcoming corporate debt maturities in 2026.

These recent developments highlight Sunnova’s commitment to enhancing its operations and addressing its financial challenges. The company’s strategic moves and analysts’ observations provide insights into Sunnova’s ongoing efforts to navigate the renewable energy market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.