BofA analysts said the firm sees a significant value upside for residential installers Sunrun (NASDAQ:RUN) and Sunnova Energy International Inc. (NYSE:NOVA) in a note Friday.
Focusing on the firm's top clean energy picks, the analysts said they came away from the 1Q23 earnings season with four key conclusions. These are that residential solar is the center of the debate, cash burn is a focus, the rate of change is still winning, and that simple is clearly preferred over complex.
"At the start of 2Q23, we like simple stories, continued rate of change, and structural tailwinds. NXT sits at the forefront of ideas that can work well in this backdrop," the analysts wrote. "FTCI remains the higher beta call on utility-scale solar recovery."
"TPIC is off to a slow start in 2023, but the data points on a wind recovery are compounding – earnings surprise from customer, Vestas, is a solid follow. Last but not least, SEDG leads as the best supply chain recovery/European play with operating margin upside still underappreciated in 2H," they added.
Meanwhile, the analysts told investors to "see through the noise," picking out RUN, NOVA, and Array Technologies, Inc. (NASDAQ:ARRY) as buys.
"While we emphasize that investor opinion on what matters is a dynamically moving target these days, we see significant value upside for resi installers RUN and NOVA. Each are without a doubt some of the most complex stories in our coverage, and leverage is an optical challenge under GAAP accounting rules," they explained.
"ARRY execution looks understated through backlog gyrations. At <10x 2024E EBITDA, ARRY screens as a value call still."