What’s Next For Sunrun Stock After 25% Gains In A Month?

The stock price of Sunrun stock (NASDAQ: RUN), a home solar panel and battery storage company, has surged over 25% in a month. This can be attributed to a broader rise in solar stocks, especially the ones that may benefit from increased energy demand for AI data centers. However, Sunrun caters to the residential market. With higher interest rates, borrowing has become pricier to install solar panels, and the sales growth rate has taken a meaningful hit lately. For perspective, Sunrun’s revenue surged 2.5x between 2020 and 2022 but fell 3% y-o-y to $2.3 billion in 2023. As such, its stock has suffered a sharp decline of 80% from levels of $70 in early January 2021 to around $13 now, vs. an increase of about 40% for the S&P 500 over this roughly three-year period.

Notably, RUN stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -51% in 2021, -30% in 2022, and -18% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that RUN underperformed the S&P in 2021, 2022, and 2023.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Industrials sector including GE, CAT, and UNP, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could RUN face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months — or will it see a recovery? The $20 average of analysts’ price estimate reflects over 50% upside from the stock’s current levels of $13. At its current levels, RUN stock trades at 1.3x revenues, compared to the 2.1x average over the last seven quarters.

Looking forward, Sunrun is expected to see a mid-single-digit decline in sales this year, but it is likely to see a sharp rebound in 2025. The company expects its solar energy capacity installed to see -15% to 0% growth in 2024. Looking at 2025, with interest rates expected to be lower, Sunrun should be able to expand its installed capacity. Overall, we think RUN stock isn’t out of the woods yet, but given the significant decline in its stock in recent years, the risk-reward is likely to be positive. Investors should also take into account other potential risks. In a scenario where the U.S. Fed decides not to proceed with the rate cuts this year owing to higher inflation, RUN stock may see lower levels.

While RUN stock can see higher levels over time, it is helpful to see how Sunrun’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 5/23/2024
[2] Cumulative total returns since the end of 2016

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