Solar energy companies have a huge market opportunity, and investors can benefit from investing in certain solar stocks, including Sunnova Energy International (NYSE:NOVA) and Sunrun (NASDAQ:RUN).
In the recent decade, the solar industry has seen massive growth. Favorable federal regulations like the solar investment tax credit and the rising need for clean electricity in both the commercial and public sectors are the major factors behind this growth. The Inflation Reduction Act, passed in August 2022, further boosted the prospects for solar companies.
Sunnova Energy International
Sunnova Energy International operates as an Energy-as-a-Service (EaaS) provider, offering residential solar and energy storage services throughout the U.S. and its territories.
The opportunity for Sunnova’s services is vast and expanding. The company expects to have 400,000 customers by the end of 2023. The demand for reliable energy is expected to increase as potential consumers’ traditional utility rates rise.
The company expanded its energy service offerings to the commercial solar market in September 2022, citing the passage of the Inflation Reduction Act as a key reason.
According to the Solar Energy Industries Association (SEIA) and Wood Mackenzie Power & Renewables U.S. Solar Market Insight report, the IRA is expected to increase commercial solar project deployment by 20% over the next five years.
Is Sunnova Energy a Good Stock to Buy?
Out of 19 TipRanks analysts who cover Sunnova Energy stock, 16 have a Buy rating, demonstrating Wall Street’s bullish thesis. None of the analysts has a Sell rating.
Overall, the stock has a Strong Buy consensus rating with a target price of $35.17, which shows an enormous upside of 61.63% from current levels.
Sunrun creates smart solutions for homes by combining solar, storage, electrification, and virtual power plants. It is the market leader in the U.S. residential solar space, accounting for about 18% of the total residential solar market and 66% of subscriptions (solar leases and power purchase agreements).
Sunrun has a significant opportunity to grow within the massive and underdeveloped residential solar market in the U.S. It’s worth noting that residential solar has penetrated only 4.2% of the U.S. single-family homes market and is expected to grow to 17% by 2031.
The company believes that its top-notch platform for acquiring customers, strong customer service skills, and extensive financing experience ensure significant barriers to entry and substantial incremental returns.
Is RUN a Good Stock to Buy?
Sunrun stock has a Strong Buy consensus rating based on 15 recent reviews from Wall Street experts, including 13 Buys and two Holds. The stock is currently trading at $28.30, and the average price target of $45.37 suggests an upside potential of 60.32% over the year ahead.
Sunnova and Sunrun stocks have rallied since the start of this year. Earlier this month, Wells Fargo analyst Michael Blum upgraded Sunrun, Sunnova Energy, and First Solar (NASDAQ:FSLR) to a Buy from Hold. Explaining his bullish stance, Blum stated, “While continued (Federal Reserve) tightening in early 2023 will likely act as a near-term headwind, the fundamental and regulatory backdrop is much improved in 2023 and beyond.”
Overall, Wall Street analysts see robust upside potential in these stocks as the long-term outlook for the solar energy market appears promising. Purchasing solar energy stocks, or at the very least putting them on your watch list, can be a good idea.