The Silicon Valley Bank crisis is creating attractive entry points in residential solar stocks Sunrun and Sunnova Energy International, according to Wells Fargo. “Weakness in resi-solar driven by the SVB crisis is a buying opportunity,” analyst Michael Blum said to clients in a note. While fears of contagion risk have caused regional banks to pull back, the greater likelihood of a pause in interest rate hikes from the Federal Reserve is a boon for solar stocks. According to the analyst, a 50 basis point reduction to a long-term discount rate of 7% to 8% would mean greater upside for Sunrun and Sunnova. “The silver lining of the bank issues is that interest rates have fallen by 30 bps (the 10-year treasury yield is down to 3.7% from 4.0%). Further, in light of a potential banking crisis, the Fed could pause rate hikes , which would reduce the cost of financing for resi-solar names, a key driver of performance,” the analyst said. At the same time, while consultants expect the US residential solar sector could fall by 2% in 2023, Blum forecasts the biggest solar companies could hit their 2023 guidance by expanding market share by just 8%. “In our view, market share gains will be driven by long tail installers/dealers migrating to the “big 3″ to take advantage of: (1) the shift to lease/PPA from loans and (2) higher battery attach rates post NEM 3.0,” read the note. Shares of Sunrun and Sunnova are down 20% and 16.4% in 2023, respectively. Blum’s price target of $29 on Sunrun implies upside of 42% from Tuesday’s close. His Sunnova target of $23 points to a 42.4% advance as well. RUN 1D mountain Sunrun shares 1-day —CNBC’s Michael Bloom contributed to this report.
