Company Overview: Sunrun Inc. (NASDAQ: RUN) is engaged in the development, sale, installation, maintenance, and ownership of residential solar energy systems in the United States. The company delivers battery storage solutions with solar energy systems in selected markets and sells services to commercial developers.
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RUN Details
Material Business Updates
Historical Financial Trend:
RUN illustrated sustainable historical growth, specifically in FY21, due to the Vivint Solar acquisition. The Operating revenues have been growing since FY17; however, the bottom line has entered negative territory due to rising operating costs. Operating revenues grew at a 31.9% CAGR (FY17 – FY21).
FY21 Financial Performance:
Top 10 Shareholders:
The top 10 shareholders together form ~46.66% of the total shareholding. BlackRock Institutional Trust Company, N.A. and The Vanguard Group, Inc. hold a maximum stake in the company at ~9.37% and ~8.61%, respectively.
Key Metrics:
Increased demand for solar energy systems and added fleet from the acquisition of Vivint Solar in October 2020 have bolstered the top line significantly. The current ratio moved close to FY16 levels, supporting its liquidity position.
Outlook:
Key Risks:
Considering the recent shortage of semiconductors and price inflation in other raw material costs, the operating profits have witnessed a considerable burden. Considering the lucrative prospects of the industry, competition has turned fierce with lower barriers to entry.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Stock Recommendation:
Performance Details: RUN has delivered 3-month and 6-month returns of ~-9.95% and ~-24.09%, respectively. The stock is trading below the average of the 52-week high price of US$60.60 and the 52-week low price of US$18.61.
Valuation Rationale: The stock might trade at a slight premium because of the surged demand in solar energy systems and favourable industry prospects in residential market. For valuation, a few peers like Generac Holdings Inc. (NYSE: GNRC), Shoals Technologies Group Inc. (NASDAQ: SHLS), Plug Power Inc. (NASDAQ: PLUG), and others have been considered.
Investment Rationale: Considering the favourable industry prospects, decent financial status, substantial top-line growth, current trading levels, and potential upside, we give a “Buy” recommendation at the closing market price of $31.13, down by ~6.71%, as of 05 April 2022.
Markets are currently trading in a highly volatile zone due to specific macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
RUN Daily Technical Chart (Source: REFINITIV)
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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