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Should You Buy Sunrun (RUN) Following Q2 Earnings Beat?
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Sunrun (RUN - Free Report) recently released its second-quarter 2024 results, wherein both its earnings and revenues comfortably exceeded their respective Zacks Consensus Estimate, backed by solid storage installation and attachment rates. The company was also successful in achieving a notable 13% growth in its customer count, which further strengthened its revenue generation prospects.
With an impressive 11% year-over-year increase in its subscriber value, realized in the second quarter, some investors might be eager to add this stock to their portfolio now. However, before making any such move, it would be reasonable to delve deeper into how this stock has been performing lately, its growth prospects as well as risks (if any).
RUN Outperforms Industry, Sector & S&P 500
Sunrun’s shares surged an impressive 18.4% in the past six months, outperforming the Zacks solar industry’s decline of 11.9% as well as the broader Zacks Oil-Energy sector’s return of 1.8%. It also outpaced the S&P 500’s rise of 5.1% in the same time frame.
A similar stellar performance has been exhibited by another solar player, First Solar (FSLR - Free Report) , in the past six months. The share price of this solar module manufacturer soared 37.8% in the said time frame.
RUN’s 6-Months Performance
Image Source: Zacks Investment Research
What Has Been Favoring RUN?
Thanks to the rapidly soaring solar demand across the United States in recent times, backed by favorable government policies as well as escalating renewable investments by corporates, solar installation activities have shot up significantly. This, in turn, has been boosting the demand for Sunrun’s solar energy as well as battery storage systems. The stark 152% year-over-year increase in RUN’s storage capacity, installed in the second quarter of 2024, bears a bright example of that.
Notably, Sunrun is the United States’ leading provider of clean energy as a subscription service, offering residential solar and storage with no upfront costs. Consequently, as subscribers are rising, so is its future revenue growth probability.
It is imperative to mention in this context that annual recurring revenues from RUN’s subscribers were approximately $1.5 billion as of Jun 30, 2024, implying an improvement from $1.1 billion at the end of the second quarter of 2023.
The company has also been collaborating with other corporations to enhance its market outreach and boost profitability. Evidently, on Aug 6, 2024, Sunrun revealed that it has joined forces with Tesla Electric, a subsidiary of electric vehicle maker Tesla (TSLA - Free Report) , to support Texas’ energy grid.
Notably, more than 150 customers of Sunrun have already enrolled in the power program established as a part of this partnership, with the incentive of being compensated for their participation while also retaining a portion of the stored energy in their batteries to provide backup power to their homes (in case of a power outage). Sunrun is expected to earn incremental recurring revenues from this program and more enrollment of its customers should further strengthen that.
Will RUN’s Growth Sustain?
Despite the rising deployment of its solar energy systems as well as battery storage units, along with increasing subscribers and strategic collaborations playing in favor of RUN, the company faces some industry challenges that one should consider while investing in this stock.
Trade restrictions imposed by the United States on Chinese goods have been playing a major bottleneck in the growth trajectory of solar players lately, with China being a primary supplier of various equipment used in solar plus storage systems. Any further trade restriction or tariff imposition can imbalance the global supply of polysilicon and other solar products, which, along with the ongoing global equipment shortages, might lead to higher solar installation costs, thereby potentially reducing the demand for Sunrun’s products.
Trading at a Premium
In terms of valuation, RUN’s forward 12-month price-to-sales (P/S) is 1.66X, a premium to the peer group’s average of 1.13X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its peers. The company is also trading at a significant premium to other industry players like Emeren SOL, which comes with a forward 12-month P/S of 0.54X.
Image Source: Zacks Investment Research
Upbeat Estimates
A quick sneak peek at the company’s upcoming earnings estimates reflects an improving trend.
The Zacks Consensus Estimate for RUN’s 2024 and 2025 earnings reflects a solid improvement from the prior-year quarter’s level.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share moved north 3.1% and 8.7%, respectively, over the past 90 days. This upward revision indicates analysts’ increased confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Wrapping Up
To summarize, despite the surge in RUN’s shares, this might not be the ideal time to invest in the stock, considering its premium valuation. However, those who already have this stock in their portfolio may stay invested as its upbeat estimates, strong quarterly results and impressive solar installation trend offer solid growth prospects. The company currently has a Zacks Rank #3 (Hold) which further supports our thesis.
Image: Bigstock
Should You Buy Sunrun (RUN) Following Q2 Earnings Beat?
Sunrun (RUN - Free Report) recently released its second-quarter 2024 results, wherein both its earnings and revenues comfortably exceeded their respective Zacks Consensus Estimate, backed by solid storage installation and attachment rates. The company was also successful in achieving a notable 13% growth in its customer count, which further strengthened its revenue generation prospects.
With an impressive 11% year-over-year increase in its subscriber value, realized in the second quarter, some investors might be eager to add this stock to their portfolio now. However, before making any such move, it would be reasonable to delve deeper into how this stock has been performing lately, its growth prospects as well as risks (if any).
RUN Outperforms Industry, Sector & S&P 500
Sunrun’s shares surged an impressive 18.4% in the past six months, outperforming the Zacks solar industry’s decline of 11.9% as well as the broader Zacks Oil-Energy sector’s return of 1.8%. It also outpaced the S&P 500’s rise of 5.1% in the same time frame.
A similar stellar performance has been exhibited by another solar player, First Solar (FSLR - Free Report) , in the past six months. The share price of this solar module manufacturer soared 37.8% in the said time frame.
RUN’s 6-Months Performance
What Has Been Favoring RUN?
Thanks to the rapidly soaring solar demand across the United States in recent times, backed by favorable government policies as well as escalating renewable investments by corporates, solar installation activities have shot up significantly. This, in turn, has been boosting the demand for Sunrun’s solar energy as well as battery storage systems. The stark 152% year-over-year increase in RUN’s storage capacity, installed in the second quarter of 2024, bears a bright example of that.
Notably, Sunrun is the United States’ leading provider of clean energy as a subscription service, offering residential solar and storage with no upfront costs. Consequently, as subscribers are rising, so is its future revenue growth probability.
It is imperative to mention in this context that annual recurring revenues from RUN’s subscribers were approximately $1.5 billion as of Jun 30, 2024, implying an improvement from $1.1 billion at the end of the second quarter of 2023.
The company has also been collaborating with other corporations to enhance its market outreach and boost profitability. Evidently, on Aug 6, 2024, Sunrun revealed that it has joined forces with Tesla Electric, a subsidiary of electric vehicle maker Tesla (TSLA - Free Report) , to support Texas’ energy grid.
Notably, more than 150 customers of Sunrun have already enrolled in the power program established as a part of this partnership, with the incentive of being compensated for their participation while also retaining a portion of the stored energy in their batteries to provide backup power to their homes (in case of a power outage). Sunrun is expected to earn incremental recurring revenues from this program and more enrollment of its customers should further strengthen that.
Will RUN’s Growth Sustain?
Despite the rising deployment of its solar energy systems as well as battery storage units, along with increasing subscribers and strategic collaborations playing in favor of RUN, the company faces some industry challenges that one should consider while investing in this stock.
Trade restrictions imposed by the United States on Chinese goods have been playing a major bottleneck in the growth trajectory of solar players lately, with China being a primary supplier of various equipment used in solar plus storage systems. Any further trade restriction or tariff imposition can imbalance the global supply of polysilicon and other solar products, which, along with the ongoing global equipment shortages, might lead to higher solar installation costs, thereby potentially reducing the demand for Sunrun’s products.
Trading at a Premium
In terms of valuation, RUN’s forward 12-month price-to-sales (P/S) is 1.66X, a premium to the peer group’s average of 1.13X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its peers. The company is also trading at a significant premium to other industry players like Emeren SOL, which comes with a forward 12-month P/S of 0.54X.
Upbeat Estimates
A quick sneak peek at the company’s upcoming earnings estimates reflects an improving trend.
The Zacks Consensus Estimate for RUN’s 2024 and 2025 earnings reflects a solid improvement from the prior-year quarter’s level.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share moved north 3.1% and 8.7%, respectively, over the past 90 days. This upward revision indicates analysts’ increased confidence in the stock.
Wrapping Up
To summarize, despite the surge in RUN’s shares, this might not be the ideal time to invest in the stock, considering its premium valuation. However, those who already have this stock in their portfolio may stay invested as its upbeat estimates, strong quarterly results and impressive solar installation trend offer solid growth prospects. The company currently has a Zacks Rank #3 (Hold) which further supports our thesis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.