Company Name: Sunrun Inc
Entry Price: $67
Target Price: $100
Projected Yield: 49.20%
Time Line: 3 to 6 months
Position Size: 1%.
Sunrun, Inc. (RUN.US) is the largest US solar panel manufacturer. It also develops and markets other related products. Sunrun's products are mostly used by private households, which want to switch to solar energy.
What's the Idea?
Capitalize on s stock that might rise with state support and more demand on solar panels among private households.
Buy Sunrun Shares >>
Why Trade Sunrun?
Reason 1: More Demand for Green Energy
The demand for renewable energy is growing steadily, with solar energy having the most potential in this sector. Sunrun was able to get a good position in this niche, supplying its solar panels to households. In 2020, it merged with Vivint Solar, the deal amount being at $3.20B and the total customer base, 500,000. The overall solar power is at 3GW. Thus, the company became the largest player in this market,
although there is more growth potential ahead, both for Sunrun and for solar energy in particular.
Being Backed by the Democrats
When Biden won the elections, the stocks of the companies working in the alternative energy sector went somewhat up. There is still uncertainty about how much they will get supported, so one cannot predict anything with precision. As long as there are substantial stimuli for such companies (which is quite likely, as Biden is very much for green energy), the sector might well continue growing.
Green Energy Trend
People are getting more interested in green energy, as this proves to be cost effective, reliable, and environmentally friendly. Sunrun solar panels allow the households to reduce electricity costs by 5% to 45%, starting the very first year. Besides, traditional electricity networks in the US experience issues on a regular basis because of the high load, so having a standalone electricity source is always a good thing.
More Electric Vehicles
With more electric vehicles, the electricity consumption among households is also rising, causing people to use cheaper sources, such as solar energy.
This might back solar energy companies like Sunrun in the midterm. Currently, only 3% of US households use solar panels; in 2030, this number may increase to 13%, Sunrun affirms.
Reason 2: A Competitive Business Model
Sunrun is the largest solar panel supplier in the US market thanks to its business model: solar panels may be supplied on an installment basis, which helps rapidly increase the customer base. One does not need to pay a large deposit either: instead, a customer may just pay a lesser amount each month, providing the company with a continuous cash flow.
Additionally, Sunrun gets paid for related products and services, such as SunRun Brightbox batteries and the Virtual Power Plant (VPP) feature. The latter, being an agreement to supply energy to traditional utility companies during high loads, is quite a promising thing. The utilities get redundant solar energy from Sunrun's retail customers, making it a win-win: Sunrun gets more money generated by the households, while its customers reduce the electricity costs even more.
In 2021, Sunrun is planning to both sell more SunRun Brightbox devices and get more VPP subscriptions, which might well boost the margin.
Reason 3: Confident Financial Performance
The pandemic did not have any large impact on Sunruns financial results, as the earnings dropped by only 2% YoY after the first three quarters of 2020, while the operating loss increased from $167M to just $208M. Meanwhile, the net loss amounted to $4.07M, against $13.8M profit in 2019. The sales, however, did drop just a little thanks to online shipping.
The large debt burden is still a major risk for Sunrun: it currently amounts to $2.50B, while the cash is at $276M. Most settlements, however, are scheduled after 2024; before that time, Sunrun is quite likely to get much more cash from its other investment projects. The company still has a negative FCF, which amounted to $788M in the first three quarters of 2020, so its financial position is rather unstable, making this investment risky.
On the other hand, Sunrun may quickly boost its earnings to improve its operations. The P/S for Sunrun is 18х, while the Forward PE is at 181х, which seems too high, but may be just okay in case the earnings get boosted by 115% to 20%, and the margin, by 10% to 15%. Finally, a few large investment banks and companies raised their target price for Sunrun in early 2021: Roth Capital now predicts it at $90, Morgan Stanley goes for $89, while JPMorgan Chase & Co stands for $98.
In summary, this is quite a speculative investment idea, as Sunrun stock is very much volatile and may cause drawdowns. So, if you are a more conservative investor, you might want to just skip it.
How to Use the Idea?
- Buy Sunrun stock at $67.
- Allocate no more than 1% of your portfolio amount. To build a balanced portfolio, you can use recommendations by our analysts.
- Sell the stock when the price is at $100 per share.
How to Buy Sunrun Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: : In the Web Terminal section, type RUN.US (Sunrun ticker in the NASDAQ) in the search box, and select Sunrun, Inc in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type RUN.US (Sunrun ticker in the NASDAQ) and select Sunrun, Inc in the search results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy Sunrun Shares >>
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