Analyst Backs Sunrun's Valuation and Pricing Potential, Upgrades Stock With 35% Upside

Keybanc analyst Sophie Karp upgrades Sunrun Inc RUN from Sector Weight to Overweight and a $27 price target.
The re-rating reflects an attractive valuation, encouraging data from California, Karp's view that residential solar companies have the sufficient pricing power to execute in the higher interest rate environment, and the macro view of nearing the end of the tightening cycle.
For 1Q23, the analyst modeled $521.7 million in revenue versus the consensus of $519.5 million.
Following the start of Net Energy Metering 3.0 (NEM 3.0) in mid-April, Karp expects questions around the shaping of full-year earnings, especially regarding the implementation of NEM 3.0, the broader financing environment, and share gains in the current macro environment. NEM 3.0 reduces the export rate for residential solar electricity by around 75%, from an average of 30 cents per kWh to 8 cents per kWh.
The analyst expects the company to discuss the state of the ABS markets and the cost of funding, incremental upside from ITC adders per IRS guidance, picking target markets strategically, and potential strategic alternatives given the stock's persistent undervaluation despite a solid growth trajectory.
Price Action: RUN shares traded higher by 0.78% at $20.72 on the last check Tuesday.

Analyst Calendar