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Deutsche Bank initiates coverage of solar stocks including Enphase Energy and SolarEdge

Stock Markets Nov 15, 2022 15:50
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By Sam Boughedda

Deutsche Bank analysts started Sunnova Energy International Inc (NYSE:NOVA) at Buy, SunPower (NASDAQ:SPWR) at Hold, Sunrun (NASDAQ:RUN) at Buy, Enphase Energy (NASDAQ:ENPH) at Buy, First Solar (NASDAQ:FSLR) at Buy, and SolarEdge Technologies (NASDAQ:SEDG) at Hold in separate notes released Tuesday.

Writing about Sunnova, the analysts assigned the stock a $36 per share price target and told investors they initiated a Buy rating based on an attractive growth profile, with a customer base to expand 40% in 2023. "We believe Sunnova trades at a discount vs fundamental value, and our Price Target is $36. We also acknowledge value-creation optionality in the medium term, through product enhancement / increased storage attachment rate, with a Blue Sky scenario and valuation of >$50," wrote the analysts.

For SunPower, they assigned the stock a $16 per share price target and stated they are waiting on the sidelines as before they potentially warm up to the story, they are looking to see further business execution.

"There have been some execution missteps in the past, although management is focused on improving this with a new team in place. Other concerns include SPWR's exposure to California's (CA) Residential market with uncertainties remaining on the potential outcome from NEM 3.0 and the company's exposure to new home construction, where headwinds and softness are expected into 2023. We view the current share price as fully pricing in risks," the analysts explained.

The analysts also noted that the firm likes SunRun's exposure to the U.S. Residential solar market, adding that it is "poised to strong growth trends (+15%.pa. to reach over 15% penetration rate by 2030 vs currently 4%), especially now with the Inflation Reduction Act (IRA) as it will further boost demand via tax credits/manufacturing credits to any domestic content."

However, the analysts cautioned that the firm will adopt a more cautious tone on Sunrun's financing, which it will monitor in the coming quarters. SunRun's price target was set at $36 per share.

Enphase Energy's price target was set at $330 per share, with Deutsche Bank explaining that the Buy rating is based on strong topline growth and manufacturing capacity expansion. "We also like Enphase's incremental US presence, set to benefit from the Inflation Reduction Act (IRA) tax credits," they added.

First Solar was started with a $180 price target as Deutsche Bank values the long-term opportunities ahead for the company." We also like the solid booking backlog, with the company fully sold out throughout 2025, and momentum to continue as demand for vertically integrated US manufactured modules is strong," stated the analysts

Finally, on SolarEdge, the Deutsche Bank analysts said the firm likes the story but is cautious about near-term headwinds. The analysts assigned a $260 price target on the stock.

"We like the company's diversified commercial product mix, but market has been focusing on execution and cost pressure this year, driving down stock performance vs peers. That being said, this leaves room for recovery over the next 6-12 months if management proves its ability to drive up performance despite a number of items weighting down on our investment thesis at this time," they remarked.

Deutsche Bank initiates coverage of solar stocks including Enphase Energy and SolarEdge
 

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