Sunrun stock gains as Citi sees positive momentum from reconciliation bill

Investing.com - Sunrun Inc (NASDAQ:RUN) stock, currently trading at $11.16, is gaining momentum following the signing of the reconciliation bill, according to Citi analysts. The stock has surged over 28% in the past week, though InvestingPro data indicates the company operates with significant debt challenges.

President Trump signed the OBBA (Omnibus Budget Bill Act) into law on July 4 after the House accepted the Senate’s amended bill without further changes. The legislation has created a more favorable environment for residential solar companies than initially expected.

Citi analysts noted that "we expect positive momentum in RUN to continue as the stock recovers from negative sentiment." They highlighted that safe harboring should gain momentum, which has already led to improved sentiment in other residential solar stocks despite stretched valuations and other headwinds.

The bill’s Prohibited Foreign Entity material assistance provision does not apply to projects beginning construction prior to the end of 2025, which may prompt developers to accelerate construction this year.

According to Platts data cited by Citi, pricing of US assembled PV modules with imported cells remained in the mid-$30c/W range in the second quarter of 2024.

In other recent news, Sunrun has been in the spotlight with several significant developments. RBC Capital Markets downgraded Sunrun’s stock rating from Outperform to Sector Perform, citing concerns over proposed changes to residential solar tax credits that could impact the company’s business model. Meanwhile, GLJ Research upgraded Sunrun’s stock from Sell to Hold, noting potential risks in maintaining a short position due to evolving legislative support for solar energy. UBS also adjusted Sunrun’s price target, reducing it to $12 while maintaining a Buy rating, as the U.S. House budget bill proposes phasing out tax credits crucial to residential solar projects.

Sunrun’s recent Annual Meeting of Stockholders resulted in the re-election of board members and approval of executive compensation, indicating shareholder support for the company’s governance practices. Additionally, the Senate’s advancement of a tax-and-spending bill has mixed implications for solar-linked stocks, as noted by RBC Capital Markets analysts. The bill preserved tax credits for solar leasing arrangements, which are integral to Sunrun’s operations, but also proposed changes that could challenge the company’s cash generation capabilities.

Analysts from Raymond (NSE:RYMD) James have suggested that market reactions to these legislative developments might remain subdued. However, the anticipation of further Senate decisions on energy policies continues to influence investor sentiment. These recent developments underscore the complex regulatory environment facing Sunrun and the broader solar industry.

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