Investors should buy up shares of Sunrun as it continues to stand out in the solar industry, according to Janney. Analyst Thomas Meric upgraded the stock to buy from neutral and raised his price target to $32, which suggests upside potential of 79.4% from Wednesday’s close. “Positive to see RUN post an operationally solid quarter, beating customer additions expectations and reiterating its stance for continued margin expansion over the next few quarters,” Meric wrote in a Thursday note. The stock was up 9.4% in premarket trading Thursday, coming into the green after losing more than 25% so far this year. Sunrun posted second-quarter earnings that surpassed Wall Street’s expectations. The company fell short in its revenue guidance for the third quarter, however, reporting an expected $880 million to $920 million compared to analysts’ expectations of $1.05 billion as gauged by FactSet. Sunrun’s guidance sent other solar stocks, like Enphase Energy and Plug Power, down during Wednesday’s trading session. Although Meric acknowledged the high level of market pessimism on residential solar power, he cited these primary reasons for the upgrade on Sunrun: Sunrun is gaining market share from small- and large-sized competitors through its differentiated products, particularly its newer Shift battery for California residents, and ability to sell into complicated tariff markets. The company’s margins are expanding through higher battery attach rates and lower component pricing, for example. And while competitors are seeing the same, Meric sees Sunrun as being “structurally more well-positioned” through its high third-party owner percentage and incumbent tax-equity relationships. Sunrun is executing on its plan despite a volatile solar market, which Meric expects will come through in added customers and margins over the next several quarters. The most foreseeable problem for Sunrun is its costs, Meric said. “Lower volume in 2H23 could lead to fixed-cost absorption headwinds, and higher battery attach rates will likely lead to longer cycle times as well as higher labor costs, especially in markets that are growing attach rates from low bases,” he said. “We expect both to be transient and, longer term, higher installation costs from batteries should decline, as crews install more units and get more efficient.” — CNBC’s Michael Bloom contributed to this report.
