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RBC Capital Markets downgraded Sunrun (NASDAQ:RUN) from Outperform to Sector Perform on Tuesday, slashing its price target to $5.00 from $12.00 amid concerns over proposed changes to residential solar tax credits. The stock, currently trading at $5.78, has fallen over 54% in the past year and is hovering near its 52-week low of $5.38. According to InvestingPro analysis, the company’s shares appear undervalued based on their proprietary Fair Value model.
The downgrade follows developments in the Senate reconciliation bill, which maintains language similar to the House version that would eliminate tax credits for residential solar leasing, a key component of Sunrun’s business model.
RBC Capital notes that while tax credits would still be preserved for storage systems, which represent approximately 70% of Sunrun’s customer base, the firm believes Sunrun faces significant challenges to achieve positive cash generation under the current industry cost structure.
The investment bank points to Europe as a proxy for how residential solar can compete in markets without subsidies, but recommends investors move to the sidelines as the industry recalibrates its cost structure and demand expectations.
RBC Capital has shifted its valuation method from a cash generation-based multiple to a price-to-book approach, citing "more limited visibility" into Sunrun’s future performance amid these regulatory changes.
In other recent news, Sunrun Inc . held its Annual Meeting of Stockholders, where key proposals were voted on, including the re-election of board members and the approval of executive compensation. Stockholders also ratified Ernst & Young LLP as the company’s independent registered public accounting firm and approved amendments to the Sunrun Inc. 2015 Equity Incentive Plan. Meanwhile, GLJ Research upgraded Sunrun’s stock rating from Sell to Hold, reflecting a strategic response to potential policy decisions favoring solar energy investments. UBS maintained a Buy rating on Sunrun but reduced the stock price target from $17.00 to $12.00, citing the potential phase-out of the Investment Tax Credit for residential solar projects. Jefferies also adjusted Sunrun’s price target from $7.00 to $6.00, maintaining a Hold rating amid discussions on the Inflation Reduction Act revisions. Additionally, BMO Capital Markets downgraded Sunrun’s stock from Market Perform to Underperform, lowering the price target from $9.00 to $4.00 due to concerns over legislative changes that could impact the company’s ability to claim solar tax credits. These developments highlight the ongoing legislative uncertainties affecting Sunrun and the broader solar industry.
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