Solar stocks Sunrun and Sunnova Energy are at attractive entry points after SVB crisis, Wells Fargo says
The Silicon Valley Bank crisis is creating attractive entry points in residential solar stocks Sunrun and Sunnova Energy International , according to Wells Fargo. “Weakness in resi-solar driven by the SVB crisis is a buying opportunity,” analyst Michael Blum said to clients in a note. While fears of contagion risk have caused regional banks to pull back, the greater likelihood of a pause in interest rate hikes from the Federal Reserve is a boon for solar stocks. According to the analyst, a 50 basis point reduction to a long-term discount rate of 7% to 8% would mean greater upside for Sunrun and Sunnova. “The silver lining of the bank issues is that interest rates have fallen by 30 bps (the 10-year treasury yield is down to 3.7% from 4.0%). Further, in light of a potential banking crisis, the Fed could pause rate hikes, which would reduce the cost of financing for resi-solar names, a key driver of performance,” the analyst said. At the same time, while consultants expect the U.S. residential solar sector could fall by 2% in 2023, Blum forecasts the biggest solar companies could hit their 2023 guidance by expanding market share by just 8%. “In our view, market share gains will be driven by long tail installers/dealers migrating to the “big 3″ to take advantage of: (1) the shift to lease/PPA from loans and (2) higher battery attach rates post NEM 3.0,” read the note. Shares of Sunrun and Sunnova are down 20% and 16.4% in 2023, respectively. Blum’s price target of $29 on Sunrun implies upside of 42% from Tuesday’s close. His Sunnova target of $23 points to a 42.4% advance as well. RUN 1D mountain Sunrun shares 1-day —CNBC’s Michael Bloom contributed to this report.
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