On Monday, Wells Fargo adjusted its outlook on Sunnova Energy International Inc . (NYSE:NOVA), reducing the company's price target to $11 from the previous $14 while maintaining an Overweight rating on the stock. The revision reflects expectations of a slowdown in growth for the solar energy provider.
The decision to lower the price target is based on the anticipation that Sunnova will take measures to optimize funding in response to the current economic uncertainty. This strategic shift is likely to decrease the company's need to raise asset-backed securities (ABS).
Wells Fargo also expects Sunnova's rate on future securitizations to increase by 50 to 100 basis points, which would enable the company to enhance the advance rate by 3-7% and secure additional cash.
The increase in the advance rate is seen as a positive step for Sunnova's funding capabilities. However, this change is projected to narrow the internal rate of return (IRR) spread over the weighted average cost of capital (WACC), which has led to the lowered price target for Sunnova's shares.
Wells Fargo's adjustment comes as companies in the renewable energy sector navigate through a period of economic headwinds. Sunnova, as a player in this industry, is adapting its financial strategies to ensure stability and continued operations amidst market uncertainties.
The Overweight rating indicates that Wells Fargo continues to view Sunnova's stock favorably, despite the lowered price target. Investors will be monitoring the company's performance and strategic initiatives closely as it maneuvers through the challenges presented by the broader macroeconomic environment.
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