Shareholders in Sunnova Energy International Inc. (NYSE:NOVA) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 5.3% over the past week, closing at US$17.78. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the current consensus from Sunnova Energy International's 21 analysts is for revenues of US$771m in 2023 which - if met - would reflect a sizeable 38% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 37% to US$0.88. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$692m and losses of US$1.01 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
There was no major change to the consensus price target of US$35.91, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Sunnova Energy International, with the most bullish analyst valuing it at US$60.00 and the most bearish at US$23.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 38% growth on an annualised basis. That is in line with its 37% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 8.3% per year. So although Sunnova Energy International is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Sunnova Energy International's prospects. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Sunnova Energy International.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential warning sign with Sunnova Energy International, including a short cash runway. You can learn more, and discover the 1 other warning sign we've identified, for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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