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Solar Stocks on the Rebound: Truist Identifies Potential Movers

In the tumultuous world of solar stocks, a glimmer of hope emerges as Truist Securities Analysts, spearheaded by Jordan Levy, assert that residential solar stocks have hit a bottom and are primed for a substantial uptick in 2024. 

A notable selloff battered these stocks last year, but Truist is singling out Sunnova Energy (NOVA) and Enphase Energy (ENPH) for a potential resurgence.

Enphase Energy, solar stocks investment

Levy, in a decisive move, upgraded Sunnova Energy and Enphase Energy to a "buy" rating, highlighting the belief that these beleaguered companies are on the brink of a recovery, especially if the Federal Reserve decides to trim interest rates this year. Sunnova's stock price target has been raised to $18, marking an 8% increase over the previous target and implying an impressive 72% upside from Monday's closing price of $10.45.

The rationale behind the bullish sentiment centers on Sunnova's expected 2023 customer additions, anticipated to land at the high end of the 135,000 to 145,000 target. Despite Sunnova facing a 32% slump last year and 35% of its traded shares being sold short, Truist sees potential for a substantial rally when results are disclosed, provided management instills confidence in its 2024 outlook.

Jordan Levy's outlook isn't without caution, acknowledging the likelihood of ongoing high volatility in the residential installer group. However, he envisions Sunnova emerging favorably from the downturn, presenting significant upside to its shares.

On the Enphase Energy front, the solar inverter manufacturer might witness a positive shift in momentum, with downside risks already factored into the stock price. Truist notes Enphase's strategic cost-cutting measures, including a reduction in its workforce, which positions the company to maintain its leading margin structure amid the solar industry's challenges. Levy adjusted Enphase's stock price target to $145, reflecting a substantial 60% increase over the previous target and suggesting a 35% upside from Monday's close.

Levy justifies the premium given to Enphase by pointing to its leading margin structure, differentiated solar storage products, and technology. As the solar landscape undergoes shifts, Truist sees Enphase as a standout player with the potential for a premium valuation.

In the same vein, Truist took a less optimistic stance on solid oxide fuel cell maker Bloom Energy (BE), downgrading it to "sell" from "hold" and slashing its price target to $9 from $12.

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