Sunnova Energy International (NOVA -4.91%) stock looks blazing hot this morning, up 18.8% through 11:05 a.m. ET after the company reported what appears to be a (sort of) an earnings beat last night.
Analysts had forecast the solar power stock would lose $0.73 per share on sales of $194.9 million in the first quarter of 2024. Instead, the company reported losses of only $0.57 on sales of $160.9 million.
Sunnova's Q1 earnings
So it's an earnings beat... in the sense that Sunnova lost less money than Wall Street thought it would lose. Still, it's hard to call losing $0.57 per share (when you shares are only worth about $4 and change) "good" news, exactly. And of course, the fact that sales came in 18% below projections seems rather bad.
So why are investors buying Sunnova stock today?
That's an excellent question, and I'm not quite sure what the answer is. Sunnova was supposed to grow its revenue in Q1, but revenue actually declined by a fraction of a percent -- despite adding 27,000 new customers. Losses did decline by about 18% as management worked to reduce its costs.
Is Sunnova stock a buy?
On the other hand, management says its primary focus these days is "increasing our cash generation and maintaining our margins." And here's the thing: Sunnova doesn't actually have any profit margin to maintain right now (or at least, not positive net margins). And as far as cash generation goes, well, that's negative, too. On the one hand, Sunnova reduced the amount of cash "used in operating activities" in Q1 by about $103.7 million. On the other hand, its capital spending increased by $109.5 million.
So the end result is that free cash flow actually got more negative -- $464.4 million burned in Q1. Again, for a company with a market capitalization of only $510 million, and carrying $7.6 billion in net debt, that's not a good look.
All things considered, I have to disagree with the investors buying Sunnova today. Sunnova stock is not one I want to own.
