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Residential solar stocks are finding a bottom and should see meaningful upside in 2024 after a brutal selloff last year, according to Truist Securities. Analysts led by Jordan Levy upgraded Sunnova Energy and Enphase Energy to buy, saying the beaten up companies’ shares are poised to rise, especially if the Federal Reserve cuts interest rates this year. Levy raised Sunnova’s stock price target to $18, an increase of $8 over the previous target, implying 72% upside from Monday’s close of $10.45. The analyst expects the solar installer’s 2023 customer additions to come in at the high end of its 135,000 to 145,000 target. With Sunnova slumping 32% last year and 35% of its traded shares sold short, “we see potential for shares to rally” when results are reported, assuming management is “able to provide confidence around its 2024 outlook,” Levy wrote. “While we don’t expect we’ve seen the end of high volatility in the resi installer group, as rate cuts progress and U.S. resi markets gain stability/progress toward a gradual recovery, we see NOVA emerging from the downturn in a favorable position w/ notable upside to shares,” Levy wrote Tuesday. Solar inverter manufacturer Enphase also may gain momentum now that downside risks are largely already priced into the stock, Levy wrote. Enphase is reducing costs by slashing its workforce, which should allow the company to maintain its leading margin structure amid the solar downturn, Truist said. Levy raised Enphase’s stock price target to $145, a $60 increase over his previous target, implying 35% upside over Monday’s close. “We believe a premium to the peer group average is warranted given the company’s leading margin structure & differentiated solar/storage products/technology,” the analyst said. As part of the same call, Truist downgraded solid oxide fuel cell maker Bloom Energy to sell from hold, and cut its price target to $9 from $12. —With reporting by CNBC’s Michael Bloom
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