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On Tuesday, BMO Capital Markets sustained its Market Perform rating and $11.00 price target for Sunrun (NASDAQ:RUN) stock. The firm’s analyst highlighted Sunrun’s recent financial move, where the company priced $695 million of solar asset-backed securities (ABS) notes across four tranches, with some privately placed. According to InvestingPro data, Sunrun operates with a significant debt burden of $12.7 billion, making this financing crucial for its operations. The publicly offered notes were priced with a 192 basis point spread and a 6.3% yield, indicating a 42 basis point improvement in spread compared to similar classes from its September 2024 issuance.
The structured financing, collateralized by 39,458 leases, reflects a more favorable cost of capital for Sunrun than in the past. The weighted average advance rate across the four classes stood at 66% at a present value discount rate of 6% (PV6), which is approximately 750 basis points lower than the advance rate of Sunrun’s September issuance. While the company maintains a current ratio of 1.47, indicating adequate liquidity to meet short-term obligations, InvestingPro analysis reveals the company is quickly burning through cash.
This transaction demonstrates Sunrun’s ability to secure funding at improved terms, which could be a positive sign for the company’s financial flexibility and cost structure. The pricing of the ABS notes suggests a better market reception and financing conditions for Sunrun’s leased solar assets. The company’s stock has shown recent momentum with a 10.5% gain over the past week, though it remains down about 43% over the last six months.
Despite this development, BMO Capital Markets has not altered its stance on Sunrun’s stock, maintaining the Market Perform rating and the price target of $11.00. The unchanged rating indicates that while the analyst acknowledges the improved financing terms, it does not substantially alter the firm’s outlook on the stock at this time.
Investors in Sunrun shares may consider this recent transaction as a reflection of the company’s ongoing efforts to optimize its financing strategy and reduce capital costs. However, BMO Capital’s reiteration of its rating and price target suggests a cautious perspective on the stock’s potential for growth or revaluation in the near term.
In other recent news, Sunrun has been the subject of various analyst adjustments. Jefferies reduced Sunrun’s stock price target to $17 but maintained a buy rating, expecting the company to meet its 2025 cash flow objectives despite a challenging market. UBS also upgraded Sunrun to a buy rating, citing the company’s growth in market share and increased deployment of battery storage. However, Clear Street reduced its price target for Sunrun, reflecting a cautious outlook amid external uncertainties.
Sunrun’s recent developments include a reshuffling of its board of directors, with Gerald Risk departing and John Trinta appointed as the new Audit Committee Chair. The company reported strong third-quarter results, achieving a milestone of 1 million customers and a record number of storage installations. Its annual recurring revenue surpassed $1.5 billion, a 22% increase from the previous year, and it installed 336 megawatt-hours of storage, a 92% increase over the prior year.
The company projects a cash generation of $50 to $125 million in the next quarter and $350 to $600 million in 2025. It also anticipates installing 320 to 350 megawatt-hours of storage and 240 to 250 megawatts of solar capacity. These projections highlight Sunrun’s continued focus on growth and profitability despite the current policy environment.
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