Sunnova Energy International Inc: Stock Chart Points to Target of at Least $53

Institutions & Insiders Buying NOVA Stock

The move toward green energy is in full swing in the U.S., firmly supported by President Joe Biden. An extremely optimistic goal to cut carbon emissions by 50% by 2030 will drive the animal spirits in the green energy space.

There are numerous avenues to drive down carbon emissions, including solar, wind, alternative fuels, and electric vehicles.

In the alternative energy space, Sunnova Energy International Inc (NYSE:NOVA) could really bust out.

Sunnova provides solutions in residential solar and energy storage in more than 30 U.S. states and territories. (Source: “About Sunnova,” Sunnova Energy International Inc, last accessed August 10, 2021.)

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Weakness in Sunnova Energy Stock’s Price Means Opportunity

After trading at a 52-week high of $57.70 in January, NOVA stock has retrenched by 36%, where I see an opportunity.

The below chart shows Sunnova Energy stock rallying from its low in March 2020 to well above its pre-pandemic level. The upward push was supported by strong relative strength and a bullish moving average convergence/divergence (MACD).

NOVA stock is currently looking for support at the 50-day moving average of $34.35. A break of the 200-day moving average at $37.75 could drive Sunnova Energy stock toward its high.

Chart courtesy of StockCharts.com

The above chart shows a double top breakout on July 29, with a price objective of $53.00.

Surging Revenues & a Pathway to Profitability

Sunnova Energy International Inc’s four-year revenue picture shows the company more than doubling its revenues from 2017 to its record $160.8 million in 2020.

Sunnova Energy delivered double-digit revenue growth over the last three years. Moreover, the compound annual growth rate was an impressive 27.9% during the last five years.

Fiscal YearRevenues (Millions)Growth
2017$76.9N/A
2018$104.435.8%
2019$131.626.0%
2020$160.822.2%

(Source: “Sunnova Energy International Inc.” MarketWatch, last accessed August 10, 2021.)

And there’s optimism about what’s ahead.

Sunnova Energy is expected to accelerate its revenue growth rate to 41.1% to $226.9 million this year, followed by growth of 45.2% to $329.5 million in 2022. (Source: “Sunnova Energy International Inc. (NOVA),” Yahoo! Finance, last accessed August 10, 2021.)

In the last five years, the company produced four straight years of earnings before interest, taxes, depreciation, and amortization (EBITDA) income, including a record $32.5 million in 2020.

Fiscal YearEBITDA (Millions)Growth
2017$19.7N/A
2018$32.364.1%
2019$28.4-12.0%
2020$32.514.3%

(Source: MarketWatch, op. cit.)

While its revenues and EBITDA have been sound, the hurdle facing Sunnova Energy International Inc is its failure to produce generally accepted accounting principles (GAAP) earnings-per-share (EPS) profitability.

Fiscal YearGAAP Diluted EPSGrowth
2017-$1.42N/A
2018-$1.59-12.0%
2019-$4.14-150.9%
2020-$2.8730.7%

(Source: MarketWatch, op. cit.)

Looking ahead, the analyst estimates for Sunnova Energy International Inc vary from continued losses to profits.

The consensus estimate is that the company will lose $0.80 per diluted share this year, but one estimate calls for profits of $1.16 per diluted share. (Source: Yahoo! Finance, op. cit.)

For 2022, the consensus expectation is that Sunnova Energy International Inc will narrow its loss to $0.46 per diluted share, with an optimistic estimate calling for earnings of $2.52 per diluted share. (Source: Yahoo! Finance, op. cit.)

Sunnova Energy’s free cash flow (FCF) remains extremely negative as the company spends capital on building its network across the country. I would like to see the FCF situation improve.

Fiscal YearFCF (Millions)Growth
2017-$289.6N/A
2018-$264.28.8%
2019-$601.1-127.5%
2020-$709.8-18.1%

(Source: MarketWatch, op. cit.)

The risk for Sunnova Energy International Inc is its massive debt load of $2.7 billion, compared to the company’s cash of $368.8 million. (Source: Yahoo! Finance, op. cit.)

While not an immediate concern, Sunnova Energy will need to address its debt. A move to positive FCF as revenues jump would help, since the funds could be used to reduce debt.

Analyst Take

Sunnova Energy International Inc has wide institutional ownership, with 340 institutions holding a 97.7% stake in its shares. (Source: Yahoo! Finance, op. cit.)

Another good sign is that insiders have bought NOVA stock to the tune of a net 2.4 million shares over the last six months. (Source: Yahoo! Finance, op. cit.)

While Sunnova Energy stock isn’t cheap, I feel that the market is justified in paying a premium for it, given the company’s potential over the next decade as the country strives to be carbon-neutral.