Skip to Content
Morningstar

Sunrun Earnings: Focus Shifts From Growth to Cash Generation

Technology Sector artwork

We lower our fair value estimate for no-moat Sunrun RUN to $14 per share from $24 following third-quarter results. The lower valuation is a result of lower growth and higher capital costs moving forward, partially offset by a rising battery storage mix. We view shares as slightly undervalued in light of our Very High Uncertainty Rating.

Sunrun’s third-quarter results were highlighted by a shift in strategic focus from growth to cash generation. The company lowered solar energy capacity installed growth from 10%-15% to 2%-5% amid the ongoing strategic shift. Sunrun is also increasingly prioritizing solar plus battery storage customers, while deemphasizing solar only customers. The company expects to achieve a battery storage attachment rate in excess of 40%, well above national averages.

We lower our forecast for market share modestly given the company’s strategic shift. In addition, we assume a higher subscriber value, driven by higher storage attachment rates, largely offset by higher discount rates. Sunrun’s business model remains highly sensitive to ongoing changes in long-term interest rates.

The company reiterated annual cash generation in the range of $200 million-$500 million, with a bias to the low-end of the range. If achieved, we think this would be a positive for shares given Sunrun has historically not generated positive cash flow.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Brett Castelli

Equity Analyst
More from Author

Brett Castelli is an equity analyst, energy and utilities, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. His coverage focuses on clean energy companies across renewables and emerging technologies.

Before joining Morningstar in 2021, Castelli spent more than eight years in various analyst roles for TortoiseEcofin, a boutique asset manager. His coverage focused on North America and included companies within traditional energy, electric utilities, and renewables. Additionally, he assisted with the firm's environmental, social, and governance efforts and played an important role in integrating ESG into the investment process. Castelli spent a year at the firm's London office following an acquisition.

Castelli holds a bachelor's degree in finance from the University of Missouri's Trulaske College of Business. He also holds the Chartered Financial Analyst® designation.

Sponsor Center