Sunrun Share Price Drops 6% Following Q4 Results
Sunrun Inc. (NASDAQ:RUN) shares dropped more than 6% on Friday following the company’s Q4 results, with EPS of ($0.19) coming worse than the consensus estimate of ($0.02). Revenue was $435.23 million, compared to the consensus estimate of $409.1 million.
According to the analysts at Oppenheimer, the CA policy uncertainty is aiding booking activity for the company, and guidance for at least 20% growth in 2022 would be a substantial accomplishment given its scale.
The analysts expect the potential changes to CA solar rules to drive strong bookings through year-end given the timeline for revisions, public comments, and the anticipated grace period. The analysts are encouraged by the company adding a new battery supplier as they expect cell supply will become increasingly difficult and attach rates for storage will continue to grow.
The brokerage remains constructive on shares as it believes interest rate concerns are priced in and that the company will enjoy tailwinds from higher utility rates.
| Symbol | Price | %chg |
|---|---|---|
| 322000.KS | 26550 | -0.38 |
| SWSOLAR.BO | 696.3 | 0 |
| SWSOLAR.NS | 695.9 | 0 |
| JSKY.JK | 52 | 0 |
KeyBanc Cuts Sunrun to Sector Weight
Analyst at KeyBanc downgraded Sunrun (NASDAQ:RUN) from Overweight to Sector Weight following a recent rebound in valuation for Sunrun and Sunnova, noting that both stocks were out of favor for most of 2023 due to the impact of interest rates on their valuations.
As businesses driven by discounted cash flow (DCF) valuations, Sunrun and Sunnova are particularly sensitive to interest rate changes, essentially acting as proxies for declining rates. Following a shift in the Federal Reserve's stance, both companies experienced a modest recovery from their lows.
The analysts observe that after this correction, Sunrun now trades closer to its net asset value (NAV), which also aligns with their price target, compared to Sunnova. In light of a generally negative outlook on the sector, KeyBanc prefers to maintain Sunnova as its only Overweight in the space, citing a greater margin of safety. Consequently, Sunrun has been downgraded to Sector Weight at this time.
Sunrun Upgraded to Overweight at KeyBanc
KeyBanc upgraded Sunrun (NASDAQ:RUN) to Overweight from Sector Weight with a $27 price target, based on the company's attractive valuation, strong data from CA, and its view that residential solar firms have a significant pricing power to execute in the higher interest rate environment.
KeyBanc noted that residential solar company shares, such as Sunrun, have significantly underperformed during the tightening cycle. Although the shares have been noticeably cheap for some time, analysts believe that the worst of the tightening cycle appears to have passed, indicating that the sentiment should reach its lowest point at current levels.
Moreover, KeyBanc has a positive outlook on the company's fundamentals and expects that multiple concerns arising from California regulatory changes and rate volatility will start to dissipate in the near term.
