SunPower, Sunnova Energy Downgraded at Goldman on Potential Headwinds For Residential Solar

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Goldman Sachs analyst Brian Lee downgraded shares of SunPower Corporation (NASDAQ:SPWR) to Sell from Neutral and Sunnova Energy (NYSE:NOVA) to Neutral from Buy on Tuesday, citing potential consumer headwinds for residential solar.

“While we remain long-term bullish on the structural growth case for resi solar in the US, we believe it is prudent to take a more selective stance on the group in the current backdrop of heightened inflation and rising interest rates, which we believe could negatively impact the appetite for certain resi solar products,” said Lee.

Lee added that while residential solar as a service enables customers to generally save money compared to traditional utility rates and would actually make more sense for consumers to adopt in a recessionary environment, they believe pockets of the sector are still more consumer-discretionary than not.

Goldman is updating its coverage views to be more selective in the residential solar sector and is shifting slightly more toward utility-scale.

“While solar stocks have underperformed for the most part in 2022, we believe it is prudent to be even more selective in the near term, particularly when considering end market exposures across the group. Heading into the year, we had a preference for resi vs. utility-scale solar given better growth visibility and less supply chain risks, however, we now shift our preference given what we feel is better risk-reward in utility-scale following a round of estimate cuts in the group and significant pullbacks across many names tied to this vertical.”