Continued Revenue Growth Could See Sunrun Stock Rise To $60 – Trefis

Up 5.5x from its low in March 2020, at the current price of $44 per share, we believe Sunrun stock (NASDAQ: RUN) has further upside potential. Sunrun, a provider of residential solar panels and home batteries, has seen its stock rise from $8 to $44 off its March 2020 low, significantly more than the S&P which increased by around 80% from its lows. Further, the stock is up 2x from the level it was at before the pandemic. However, we believe that Sunrun stock could rise more than 30% to its April 2021 high of $60, driven by expectations of continuing demand growth and strong Q1 2021 results. Our dashboard What Factors Drove 645% Change In Sunrun Stock Between 2017 And Now? has the underlying numbers behind our thinking.

Sunrun stock’s rise since late 2017 came due to a 73% jump in revenues from $533 million in FY 2017 to $922 million in FY 2020. However, a 33% increase in the outstanding share count weighed on revenue growth, leading to RPS (revenue-per-share) rising by only 31% in comparison, from $5.05 in 2017 to $6.59 in 2020.

Further, Sunrun’s P/S (price-to-sales) multiple rose from 1.2x in 2017 to 10.5x by 2020 end, but has since dropped to 6.7x. We believe that the company’s P/S ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of Coronavirus and the resulting lockdowns hampered solar module demand in the first half of 2020. However, the switch to solar as a cheaper source of energy has risen since, and this is evident from Sunrun’s Q1 2021 revenues. Sunrun’s revenue came in at $335 million for Q1 2021, up from $211 million in Q1 2020, driven by strong growth across both revenue segments, namely customer agreements and incentives, and solar energy systems and product sales. However, as Sunrun’s expenses soared at a rate higher than that of revenue growth, operating loss nearly tripled from $63 million to $179 million. However, net loss attributable to common shareholders came in at $24 million, slightly better than the $28 million in Q1 2020, and with the rise in outstanding share count, EPS improved from -$0.23 to -$0.12.

Additionally, with the lockdowns being lifted and the continued growth in demand for solar energy, we believe the company’s revenues stand to benefit further in the medium term. If the company is also able to control expenses going forward, a rise in investor expectations could drive up the company’s P/S multiple. We believe that Sunrun stock can rise more than 30% from current levels, to regain its recent high of $60.

While Sunrun stock may move higher, it is helpful to know how its peers stack up. Sunrun Stock Comparison With Peers summarizes how Sunrun compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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May 27, 2021 Harry Hall