Sunrun (NASDAQ: RUN) Eyes Brighter Days Ahead

After sustaining a 50% drop, it looks like shares of Sunrun (NASDAQ: RUN) is about to start off on the road to recovery. The residential solar panel company was one of the hottest stocks of 2020, and managed to log a 1,000% run, the peak of which came in early January. As interest rates started popping around that time, however, its shares were caught in the overall slide that the tech space experienced for much of Q1, and saw a sharp selloff take them back towards last summer’s levels. 

But in recent weeks, there’s been a run of upgrades with both the fundamentals and technicals starting to align. With the NASDAQ index back to all-time highs, it’s not unreasonable to think a risk-on sentiment will light a fresh rally under Sunrun’s shares. 

Fresh Upgrades

On Friday, Piper Sandler upgraded Sunrun shares to Overweight from Neutral. The 50% slide in the share price and the long-term growth potential has them thinking there’s a serious buying opportunity to be had at current prices. Their $77 price target suggests upside of close to 50% which is sure to get the right kind of attention from investors. 

Analyst Kashy Harrison summed up the gap between the share price and the larger picture when he said "since the middle of February, solar stocks have come under significant duress due to a combination of rising interest rates, regulatory uncertainty associated with net energy metering in California, a lack of imminent catalysts and a remarkable 2020 run, but the recent move lower is somewhat of a head-scratcher."

Harrison believes Biden’s federal infrastructure package will offer some crucial support to solar names that have been struggling to justify their post-2020 valuations. The trickle-down benefits from this $2.2 trillion package were one of the reasons Morgan Stanley saw fit to list Sunrun as one of the most obvious clean-tech winners, with KeyBanc also expecting them to make hay while the sun shines. The thinking here is that extensions to investment tax credits and production tax credits are major tailwinds to solar names that aren’t currently reflected in share prices. 

For those who are thinking about getting involved at current levels, or existing investors who can lower their cost basis by adding more, there’s not a lot to dislike about the opportunity right now. Towards the end of March, Goldman Sachs were out with an upgrade based around the recent sell-off being completely out of sync with what are still attractive long-term fundamentals. They echoed the bullish comments of Susquehanna who in the same week initiated coverage on Sunrun stock with a Positive rating and a $75 price target.  

Susquehanna analyst Biju Perincheril sees them having a "dominant current market position and ability to increase market share in the U.S.," with favorable federal policy offering a solid reason for there to be a consistent bid found on any future weakness. 

Getting Involved

Shares have been consolidating last quarter’s fall in the weeks since and closed last week trading towards the bottom of a narrowing range. In Monday’s pre-market session they were up more than 1%, and they look set for a breakout in the coming weeks. With so many sell-side heavyweights behind them and with Biden ready to deploy billions of dollars in investment to their industry, you’d have to be thinking any breakout is going to be to the north. 

We saw last year how quickly Sunrun can run once a rally gets going, and it feels like we’re about to see a replay.