Solar stocks Enphase Energy and Sunnova jumped in trading Tuesday after an analyst upgraded both stocks to a buy rating.
Truist analyst Jordan Levy upgraded Enphase from hold to buy, with a price target of 145, up from 85. Meanwhile, the analyst upgraded Sunnova from hold to buy, raising Truist's price target to 18 from 10.
In a client note titled "Finding a Bottom," Levy cited potential for both solar stocks to improve their performance after a rough 2023.
"While we've surely not seen the end of volatility in the group, we see meaningful upside opportunity moving into the Fed rate cut cycle, particularly for the residential solar group," Levy wrote.
On the stock market today, ENPH stock rose 3.8% to 111.30. NOVA stock, meanwhile, gained 4.8% to close at 10.95.
Clouds Clearing For Solar Stocks?
Both companies focus on the residential solar market. Sunnova is an installer, while Enphase makes microinverters that convert power from solar panels into usable electricity.
The residential market for solar was hit hard last year by rising interest rates. The Energy-Solar group tracked by IBD MarketSmith ranked as the worst overall performer among 197 industry categories for much of last year. But things haven't improved much for solar stocks so far in 2024, with the group down a collective 16% on the year entering trading Tuesday.
Sunnova reports earnings on Feb. 22. Truist believes that the company will report customer additions "toward the high end" of its range of 135,000 to 145,000. Nova stock is already down nearly 30% year to date. Levy wrote that Truist sees "potential for shares to rally on the print, should NOVA be able to provide confidence around its 2024 outlook."
Meanwhile, Truist expects investors will be focused on the tone from management when Enphase delivers earnings Feb. 6. Positive market commentary could boost ENPH stock, Levy wrote.
Further, he said Truist is "incrementally positive on ENPH's ability to hold its leading margin structure" following the company's December layoffs. Enphase laid off about 10% of its workforce late last year.
ENPH stock climbed on Monday following news that rival SolarEdge was cutting about 16% of its workforce.
