RUN – Close-up

Sunrun Inc. offers solar energy solutions. The company installs, monitors and maintains solar panels on the roofs of homeowners, supplying solar electricity. Sunrun serves customers in the United States.

Sunrun provides homeowners with clean, affordable solar energy, eliminating the high initial costs and complexity used to define the residential solar industry. Its scalable operating platform provides the company with a number of operational advantages. It can stimulate distribution by offering offers for solar services through multiple channels, including its diverse partner network, and operations directly to customers allow it to achieve capital efficient growth. In addition, the company claims to have excellent customer service. Sunrun generates revenue from operating leases, incentives and from solar energy systems and product sales.

Operations

Sunrun operates the second largest fleet of residential solar power systems in the United States in more than 15 states and a total of more than 1,900 MW of installed capacity.

Sunrun installs solar energy systems in customers’ homes and sells them the solar energy produced by these systems for an initial 20 years. In return, the company receives 20 years of predictable cash flows from customers of high credit quality and qualifies for tax and other benefits. It finances portions of these tax breaks and cash flows through tax capital and non-regulated debt structures to finance the company’s initial costs and growth investments. Sunrun generates revenues from operating leases and incentives, which account for about 45%, and from solar energy and product sales systems, about 55% of revenues.

Financial results

Sunrun’s revenue increased 13% to $ 858.6 million in 2019. The increase in revenue from customer agreements by $ 72.8 million is due to both an increase in solar energy systems under customer agreements introduced in operation in 2019, as well as full-year revenues recognized in 2019 for systems put into operation in 2018, compared to only a partial amount of these revenues related to the period in which the assets were in operation in 2018. Revenues from sales of solar energy systems increased by $ 96.9 million compared to the previous year due to increased demand from retail partners.

The company’s net loss further declined by $ 130.8 million to a loss of $ 391.0 million. The decline is mainly due to higher operating costs.

The money held by the company at the end of 2019 increased by $ 58.8 million to $ 363.2 million compared to $ 304.4 million in the previous year. The cash used for operations and investment activities is $ 204.5 million and $ 843.3 million, respectively, mainly for solar energy cost payments. The cash provided by financial activities is $ 1.1 billion.

Strategy

Sunrun’s strategic partnerships cover relationships with new entrants who have not previously been involved in solar energy, including consumer marketing, retail and specialized energy retail companies. The company’s strategic partners find the residential solar market attractive, but acknowledge that significant barriers to entry make partnerships the preferred method of reaching out to solar customers. Through these strategic arrangements, the company typically offers its solar services offerings to the strategic partner’s customer base and installs solar energy systems directly or through one of its solar partners.

Sunrun manages the customer experience and maintains the value of the economic relationship during the term of the customer’s contract and the potential renewal period. The company has established a strategic partnership in competitive processes that give the company access to millions of potential customers. As the industry grows, the company believes that its unique platform and in-depth partnership experience position the company to be the chosen partner for new market entrants. The company believes that this broad strategic relationship will help the company reduce its customer acquisition costs and make solar energy available to even more customers.

Technically, RUN ended its corrective move with a break of the diagonal around $ 46.00. After a breakout test, an impulsive long movement is noticed, signaling the reversal of the trend. For entry, I’m waiting for the price to go down to lower levels. At the moment, the price is exactly the resistance, and it will probably be the movement that will bring it down enough to be attractive for purchases. Thus, the stop loss can be placed closer, directly below the trend line and local swing lows. Entry would follow only after a price-action signal to confirm the beginning of the next leg up.

Banking sentiment for this company is extremely positive. Among the Wall Street players for this asset are big names such as JP Morgan and Goldman Sachs.

Of the 19 published analytical reports, 17 have a buy rating of 1 with hold and 1 sell, which is excluded from the statistics due to the difference in its analysis methodology.

For the next 12 months, the average price expected by banks is $ 76.53, at a current price of 52.71. This difference is a potential increase of 45.2% of the current price.

Revenue & EPS

On the part of Revenue, there is growth over the years, which is likely to continue in 2021 and 2022. As consumption of this type of products will increase more and more. Americans are not yet among the best equipped for solar panels, and there are still many sales that can be made, given that SUN is one of the markethare leaders in the United States.

The company made good profits even in 2020, during the crisis. 2021 is expected to be almost twice as good with total revenues of around 1.5 billion compared to 922 million in 2020.

Only EPS is probably the factor that keeps the share price so low. It is noticed that EPS is still negative, but there is a positive trend after the end of 2020. If the company continues to operate in the same way, in time it will probably come out with a positive EPS somewhere around or after 2022.

* is not a trading recommendation *