Higher-for-longer interest rates could slam key solar energy stocks, according to Truist. The firm downgraded solar panel installers SunRun and Sunnova to hold from buy in a Wednesday note, and lowered its price targets to $12 and $11, respectively, from $30 and $35. Truist now forecasts roughly 13% upside for SunRun and 17% for Sunnova. Analyst Jordan Levy said that while the long-term prospect of renewable energy remains favorable, investors could be better suited to invest in utilities and residential suppliers in the short-term. “Following strong equity performance for much of the year, Utility Scale Solar names have not been protected from the recent sell-off as investors question the impact of higher rates on deployments,” Levy said. Investors remain worried that the Federal Reserve could keep interest rates elevated for longer-than-expected, and also initiate less rate cuts in 2024. Bond yields have soared in recent days, with the benchmark 10-year Treasury yield reaching levels not seen since 2007. “While we believe NOVA & RUN will continue to take share given their strength in TPO [third-party owner] financing, equity price response post 2Q results makes it clear to us that the market is no longer rewarding outsized growth while companies continue to compete in the ‘land grab’ U.S. resi space.” Levy pointed toward stocks including SolarEdge and Generac to ride renewable energy volatility as interest rate uncertainty persists. “[W]e remain bullish on the long-term outlook for home electrification/resiliency, and believe the current market FCF generating names w/ Int’l & C & I exposure like SolarEdge (SEDG, Buy) & Generac (GNRC, Buy) offer an attractive way for investors to gain exposure,” he said. Shares of SunRun have slipped nearly 56% this year, while Sunnova stock has pulled back 48%. — CNBC’s Michael Bloom contributed to this report.
Truist downgrades these solar stocks, sees further struggles for the sector
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