On Thursday, Sunrun Inc . (NASDAQ:RUN), a prominent player in the residential solar market, received a favorable outlook from TD Cowen as the firm initiated coverage on the company's stock. The analyst at TD Cowen set a Buy rating on Sunrun, with a price target of $21.00, signaling confidence in the company's future performance. Currently trading at $9.15, the stock has experienced a significant decline of over 53% year-to-date, according to InvestingPro data, and is trading near its 52-week low.
The analyst highlighted several key factors contributing to Sunrun's potential for growth. Among these is the company's ability to drive contracted subscriber value growth, which is supported by a higher battery attachment rate and Investment Tax Credit ( ITC (NS:ITC)) levels, as well as the absorption of fixed costs. Sunrun's scale, with annual revenue of $2.04 billion, and its position as a leading residential solar financier were also cited as pivotal to its strategy for expansion, though InvestingPro analysis indicates the company operates with relatively thin gross profit margins of 13%.
According to the analyst's statement, Sunrun has established a method of raising non-recourse debt against the value of its contracted subscribers. This financial strategy is seen as a solid foundation for the company to meet its cash generation targets for the year 2025.
The analyst's endorsement reflects a belief in the robustness of Sunrun's business model and its revenue-generating capabilities. InvestingPro data shows the company maintains a current ratio of 1.47, indicating sufficient liquidity to meet short-term obligations despite carrying significant debt of $12.67 billion.
Sunrun's approach to financing, which involves securing debt financing that is backed by the predictable revenue streams from its contracted subscribers, is a cornerstone of the company's financial planning. This strategy allows Sunrun to expand its operations while maintaining financial stability.
The $21.00 price target set by TD Cowen suggests that there is significant upside potential for Sunrun's stock. As of the last week, this new coverage and price target provide a fresh perspective on the company's stock for investors considering Sunrun as part of their portfolio.
In other recent news, Sunrun, a leading residential solar company, has been the subject of several recent analyst adjustments.
Piper Sandler revised its stance on the company, downgrading its rating to Neutral from Overweight and adjusting the price target to $11.00 from $23.00. This change reflects concerns about Sunrun's cash generation capabilities under a potentially less favorable Investment Tax Credit regime. Similarly, Truist Securities and BMO Capital Markets reduced their price targets for Sunrun to $12.00 and $11.00, respectively, citing policy risks and the lack of clear performance indicators in the solar industry.
In terms of company performance, Sunrun reported a strong third quarter, hitting a milestone of 1 million customers and achieving a record number of storage installations. The company's annual recurring revenue surpassed $1.5 billion, a 22% increase from the previous year. Additionally, Sunrun installed 336 megawatt hours of storage, a 92% increase over the previous year.
Looking ahead, Sunrun projects a cash generation of $50 to $125 million in the next quarter and $350 to $600 million in 2025. The company also anticipates installing 320 to 350 megawatt-hours of storage and 240 to 250 megawatts of solar capacity. These projections highlight Sunrun's continued focus on growth and profitability, despite the challenges presented by the current policy environment.
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