Sunrun (RUN) enjoys significant clout in the residential solar energy systems industry for its low-cost home solar solutions, and, more recently, its hand in lowering household energy expenses with battery storage solutions.
The company seems to live up to its mission of creating a planet run by the sun, which keeps me bullish on its prospects. Since its inception in 2007, the company has built a portfolio of 4,052 MW of installed solar energy capacity, which serves more than 573,000 customers in the U.S. The company’s strong roster of partners across the U.S. is helping it drive solid sales and installations. (See Sunrun stock chart on TipRanks)
Sunrun’s recent acquisition of its close competitor Vivint Solar has propelled the company higher in the industry, taking up approximately 15% of the U.S. residential solar market share.
On September 9, Needham analyst Vikram Bagri initiated coverage on Sunrun with a Buy rating and a price target of $75. He believes that “a rooftop is a terrible thing to waste”. He pointed out a few key points to back his bullish sentiment.
Solid Projections for Market Growth
Bagri noted that the solar industry has strong growth potential, given the almost 300% growth witnessed between 2016 and 2020. Moreover, the expected CAGR for energy capacity is projected at 16% through 2025, keeping the analyst in high spirits about the company.
This apart, President Biden’s plan to make solar energy achieve 45% of total power generation in the U.S. by 2050 is encouraging for Sunrun.
Solid Financial Position Bodes Well
Remarkably, the company is strongly capable of recycling capital to boost growth and raise new capital at 5% of the cost of capital. This means that Sunrun has successfully raised more capital than cost, eliminating the need to issue common shares to finance its business.
Thus, the company’s capital efficiency, firm market foothold, and quality service, combined with strong financial management and leadership teams, are together expected to help Sunrun gain more market share.
Battery Market Opportunities Expected to be a Pull-Forward
Bagri also expects Sunrun to benefit immensely from the addition of new customers and upselling of existing base and grid, once the supply chain issues in the battery market ease. Notably, the company is making solid progress to achieve its goal of doubling battery installations this year. The expanding electric vehicle (EV) market is only adding to its growth opportunities.
“We estimate grid services alone could add about $2,000 of incremental margin per subscriber, while EV adoption could increase the average size of installations by 30% and generate a higher margin,” he argued.
The analyst also notes that declining cost of capital, key partnerships, synergies from the Vivint acquisition and favorable government policies are excellent drivers of long-term growth.
The Wall Street seems to share Bagri’s bullish sentiments on Sunrun and has a Strong Buy consensus rating based on 10 Buys. The average Sunrun price target of $80 implies upside potential of 79.3%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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