Stock Market

Sunrun Stock: Is This Solar Stock A Winner Or Going Dark?

Key Takeaways

  • With the Inflation Reduction Act being passed in August, there are many opportunities for consumers to save money by going solar.
  • Sunrun brought in total revenue of $584.6 million during the second quarter of 2022, with the addition of 34,403 new customers.
  • Sunrun brings in substantial revenue from offering leasing plans to consumers who want to go solar without spending any money upfront.

Sunrun Inc. (RUN) is the self-proclaimed #1 residential solar panel company. Sunrun focuses on providing residential solar, battery storage, and energy services nationwide. The company also offers home solar service plans to make clean energy accessible for people without spending any money upfront.

Sunrun was established in 2007, and the company services its customers through direct-to-consumer sales, solar partnerships, and strategic partnerships. With only 4% of the 77 million addressable homes in the US currently using solar energy, Sunrun believes that the growth opportunity for this industry is massive. With the company’s mission being to create a planet run by the sun and provide affordable energy systems for all, it’s worth paying attention to this stock.

We’re going to look at Sunrun stock to see how the company generates revenue and what’s next for the company.

How are the earnings for Sunrun?

Sunrun released its earnings report for the second quarter of 2022 on August 3, they reported revenue of $584.6 million for the quarter, up 46% year-over-year. The net loss was $12.4 million or $0.06 per share.

The company splits its revenue up into two segments:

  1. Customer agreements and incentives revenue was $259.9 million, up 18% year-over-year. This includes money from customer agreements, solar energy rebate incentives, and the sales of Solar Renewable Energy Certificates (SRECs).
  2. Solar energy systems and product sales revenue was $324.7 million, up 79% year-over-year. This is the revenue from selling solar panels, inverters, racking systems, and various other solar-related equipment to retailers.

The customer agreements and incentives revenue also includes tax credits. The company is also eligible for federal or state tax credits where the installations are made. Sunrun offers two customer agreements: solar lease agreements and power purchase agreements (PPA).

With a solar lease, you pay a fixed monthly amount to use the energy from the solar system installed on your roof.

With solar PPA, you pay a set rate per kWh for the power generated by the solar system on your roof. Both of these options are popular because you can get a solar system installed on your roof with no money down. The annual recurring revenue from subscribers is at $917 million as of June 30, 2022.

The solar energy systems and product sales revenue come from the sales of the solar panels and everything associated with them. The company added 34,403 new customers in the second quarter, with 25,339 of them being subscriber additions. Many people are looking to go solar but aren’t sure of the upfront investment.

What’s the balance sheet like for Sunrun?

To provide further financial information on the company, we looked through the balance sheet results from the second quarter of 2022. Here are the numbers worth paying attention to:

  • Cash & short-term investments: $862.98 million.
  • Total accounts receivable: $216.82 million.
  • Total current assets: $1.71 billion.
  • Total assets: $17.8 billion.
  • Accounts payable: $259.2 million.
  • Total current liabilities: $991 million.
  • Long-term debt: $7.74 billion.
  • Total liabilities: $9.99 billion.

To some analysts, it seems like Sunrun is in too much debt as it appears they’re still at the growth-at-all-costs stage of business. With the company carrying so much, it’s easy to see why some analysts are concerned.

However, future earnings are more important. Adding more customers is the key for Sunrun to maintain a healthy balance sheet. We will be paying attention to the next earnings report to see if the company will be able to turn a profit any time soon.

Who are Sunrun’s competitors?

Sunrun currently has a market cap of $5.95 billion. The solar industry operates under the Oils-Energy section. There are many competitors when it comes to renewable energy. What helps Sunrun remain competitive is that they focus on residential sales and they offer leasing options to customers.

Some noteworthy competitors of Sunrun include:

  • SunPower (SPWR) is a solar technology and energy service provider to customers across the US and Canada.
  • Brookfield Renewable Partners L.P. (BEP) generates electricity with hydroelectric, wind, solar, and biomass sources with a globally diversified portfolio of renewable power assets.
  • Tesla (TSLA), the electric vehicle maker, is at the forefront of green energy and innovation in this space.
  • Clearway Energy (CWEN) is one of the largest operators and developers of clean energy in the US, focusing on solar and wind energy generation.
  • First Solar Inc. (FSLR) is a global leader making solar panels, focusing on thin film solar panels.

There are many other Sunrun competitors working in residential solar services, but we’re featuring just a few of the other stocks you might be interested in. We recently looked at topflight green energy stocks if you’re interested in a broader view of the renewable energy sector.

With the Inflation Reduction Act allocating $369 billion in funding towards fighting climate change by funding and developing green energy, the hope is that there will be enough money invested in this sector to boost all of these players.

What’s the analyst outlook for Sunrun?

We looked at what some trusted expert analysts said about Sunrun stock.

According to CNN, 17 out of 27 analysts considered the Sunrun stock a buy. Twenty-three analysts offered a one-year price target for Sun, and the median target was $48 per share. The highest estimate was $79, and the lowest estimate was $30. This information came from Wall Street analysts who have made predictions on the Sunrun stock in the past three months.

It’s important to remind you that while analysts do their best to forecast a company’s financial performance, it’s difficult to tell what the overall economy will be like a year from now with the fears of a global recession looming, threatening to decrease consumer spending, and delay growth for any company, especially those with a consumer focus.

Is Sunrun stock a winner?

Sunrun (RUN) closed at $30.47 on October 4, after going up 7% ($1.99) for the day. The stock was up because the renewable energy sector was doing better overall. Whenever oil prices go up, it’s normal for stocks in this sector (wind, solar, and electric vehicles) to go up as people turn to natural energy sources. Yesterday, October 5, they closed at 28.03, still up more than 4% over 5 days.

It’s also worth mentioning the role of the Inflation Reduction Act that was signed into law by President Joe Biden on August 16. This is the largest bill that has ever been passed to fight global warming. The bill will offer large tax credits for solar installation projects, covering everything from the panels to the labor and storage of batteries. You’ll be able to subtract 30% of solar-related expenses from your taxes, which will likely increase the demand for solar projects.

Since Sunrun is one of the largest retailers for solar projects, electric vehicle charging stations, and battery storage, this news is expected to increase revenue for the next year, with many people hopefully trying to take advantage of the tax incentives.

We can’t ignore the importance of the recent rate hikes from the Fed, though, and the role of interest rate speculation on the overall stock market. With the battle against inflation still being waged, there’s no telling what the future of consumer spending will look like, especially if we fall into a recession.

How should you be investing?

There has been plenty of volatility in the stock market, but the energy sector has felt it deeply with soaring inflation and ensuing rate hikes. Oil prices and overall market instability will have an impact on companies in the renewable energy space.

If you want to find the right green investments without going through lots of research, Q.ai’s Clean Tech Kit might be what you’re looking for. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations.

Bottom Line

We will pay close attention to the next earnings report scheduled for November 2, 2022. If consumers decide to take advantage of the tax incentives offered for switching to solar, then Sunrun can increase its revenue as a leader in residential solar installation.

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