Should I Buy Sunrun (RUN)? Finance YouTuber Analysis

The YouTuber suggests buying RUN, stating it's an affordable stock that can change one's life. He advises accumulating between 100 and 1000 shares, implying a belief in its long-term appreciation.

“This first one is run ticker symbol. Are you in? It's sitting at $20 for me. Okay, [snorts] put that one on your watch list. You don't got to get it, but at least be aware of it for coach.”

The YouTuber suggests avoiding Sunrun due to proposed changes in tax credits, specifically the Investment Tax Credit (ITC). As an installer, Sunrun heavily relies on the ITC to finance projects and generate upfront revenue. The potential removal of these subsidies would significantly impact their financing structure and profitability, making their growth trajectory uncertain.

“If this investment tax credit goes away, that is likely not going to be available for them.”

The YouTuber is holding Sunrun, believing a recovery is likely in the next couple of years due to rising utility rates and falling component costs, which could make solar more economical for consumers. However, he notes current high interest rates and questionable accounting practices for contract renewals as headwinds.

“This is not an area that I'm putting new money in right now but I'm not selling my solar stocks because I do think there is going to be a recovery coming over the next couple of years.”

The analyst recommends Sunrun, a leading residential solar installer, as a potential investment for 2024. The company faced challenges in 2023 from high interest rates and reduced installation demand, but is now benefiting from decreasing hardware costs for modules and batteries, and falling interest rates which lower their borrowing costs. These factors are expected to improve margins and drive a pickup in bookings and installations.

“if you're interested in this industry I think that's where I would be looking first”

The YouTuber suggests dollar-cost averaging into Sunrun, noting that despite recent declines due to rising interest rates impacting residential solar financing, the long-term outlook is solid. He believes the company, as a leading player in the industry, will adjust pricing and benefit from increasing electricity costs and growing solar adoption.

“I think the future is solid maybe time to start dollar cost averaging into some of these stocks or a basket of these stocks”

Travis Hoium argues that Sunrun's business model, heavily reliant on long-term leases, is severely impacted by rising interest rates. He highlights that the present value of their contracted assets is diminishing, with some calculations showing negative net earning assets, especially when using a more realistic discount rate of 8% compared to their previous 5%. He also dismisses the value attributed to contract renewals, seeing no evidence for it, and concludes that the company faces significant challenges in a rising interest rate environment.

“I've been warning for years now that they're taking a ton of risk that investors don't seem to be pricing in onto the balance sheet and we saw the impact of that in the most recent quarter Rising interest rates are destroying the value that Sunrun has on its balance sheet through its leases.”

The YouTuber suggests that solar installers like Sunrun are better positioned to benefit from the new tax credits, as the credits are designed to incentivize installations, particularly smaller projects. He notes that these companies did not see a market reaction, implying an undervalued opportunity given their direct benefit from the new rules, which will make solar more economical for consumers and increase demand for installers.

“I actually think installers look a lot better today than they did just yesterday.”

Travis Hoium advises avoiding Sunrun due to concerns about its valuation methodology, particularly its reliance on future contract renewals and an overly optimistic discount rate for cash flows. He argues that if more realistic assumptions are applied (zero value for renewals, higher discount rate), the company's net earnings assets could be negative, exposing significant risk, especially with rising interest rates.

“This is not a stock that I would be buying today. I don't think it's going to generate the kind of value that management has calculated here and for exactly the reasons that I've highlighted.”

The YouTuber identifies Sunrun as a leader in residential solar, noting its business model of financing projects on customer roofs through long-term contracts. This model provides a stable revenue stream in the growing residential solar market.

“on the residential side Sunrun and SunPower are the two leaders there they're a little bit different Sunrun finances most of the projects that they're building on people's roofs and people sign a long-term contract.”

The analyst is buying Sunrun ahead of Senate negotiations on the government's budget bill, believing it's a rebound opportunity. He notes that Republican districts have benefited significantly from clean energy tax credits, suggesting senators will negotiate a phase-out rather than an elimination, which could send shares back towards $10.

“I've also been buying Sunun, ticker RU, ahead of a Senate negotiations on the government's budget bill. The House version that eliminated clean energy tax credit sent the shares crashing 42%. But there's a good reason to believe it's a rebound opportunity.”

The analyst is buying Sunrun after a 42% crash due to the House's budget proposal repealing clean energy tax credits. He believes the market overreacted and expects the Senate to save or phase out these credits by July 4th, creating a short-term trading opportunity.

“Several senators are already vocally lining up to save or at worst phase out those credits to avoid the worst of the provision that, according to Sunun CEO, would cost 250,000 jobs and increase household electricity costs across the country.”

The analyst suggests avoiding Sunrun due to its high debt load, slow sales growth (1.2% this year, 9.7% next year), and continued unprofitability. He argues that the company's high leverage and lack of strong growth make it vulnerable in the current high-interest rate environment, potentially requiring further debt or share dilution to survive.

“Sunrun several years out from earnings profitability they're going to have to issue more debt maybe issue more shares and delute shareholders to be able to survive through this tough economic period”