Sunrun Inc.

RUN Details

Sunrun Inc. (NASDAQ: RUN) is a home solar, battery storage, and energy services company. It was founded in 2007 with the objective of making local clean energy accessible to the people.  

Key Positives:

Increase in Current Ratio (1.53x in FY21 vs 1.26x in FY20), Increase in Quick Ratio (1.03x in FY21 vs 0.95x in FY20)

Key Negatives: 

Increase in D/E Ratio (1.04x in FY21 vs 0.79x in FY20), Negative Net Margin (-60.9% in FY21)

Key Risks:

Regulatory Risk, Macro Risk, Price Risk, Demand Risk, Supply Chain Risk

Result Performance for the Year Ended 31 December 2021 – FY21

• The company reported growth of 31% in Solar Energy Capacity Installed in FY21, exceeding guidance levels.
• It ended Q4FY21 with the additions of 29,870 customers during the quarter, thus bringing total customers to 660,311 during FY21 end. This reflected 20% y-o-y growth in customers.
• The Group reported annual recurring revenue of $851 million as of 31 December 2021, with average contract life remaining at 17.4 years.
• Gross earning assets stood at $9.7 billion as of 31 December 2021.

Source: Company Reports, Analysis by Kalkine Group

Key Updates

• The company is expected to release its Q1FY22 results on 04 May 2022.

Outlook

The management seems to be optimistic about the company's prospects and expects solar energy capacity installed growth to be 20% or greater for the full-year 2022. The Group anticipates solar energy capacity installed to be in a range between 195 and 200 megawatts in Q1FY22.

Key Risks

The company is prone to risks of uncertainty in macro-economic conditions that include COVID impact and supply chain disruption. It is also exposed to changes in policies and regulations that include net metering and interconnection limits or caps and licensing restrictions

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Technical Commentary:

Currently, the RUN's prices are trading around a crucial support level of USD 21.9 which is the 78.60% retracement of the previous upside rally, indicating a possibility of an upside reversal around this support level. On the daily chart, prices are trading around below the trend following indicators 21-period SMA and 50-period SMA which may act as the resistance levels for the stock. The leading indicator RSI (14-period) is around the oversold region and shows a reading of 32.82.

Stock Recommendation:

The stock has delivered a 6-month and 1-year return of ~-56.39% and ~-53.24%, respectively. It is currently trading below the average of 52-week high price of $60.60 and the 52-week low price of $18.61.

The stock has been valued using an EV/Sales multiple based on relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to peer median EV/Sales multiple (NTM basis), considering negative profitability and key associated risks.

Considering the impressive financial performance and decent outlook, we give a “Buy” recommendation on the stock at the closing market price of $22.55 per share, as of 20 April 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Sunrun Inc. (RUN) is a part of Kalkine’s Global Green Energy Portfolio

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.