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On Thursday, BMO Capital Markets downgraded Sunrun (NASDAQ:RUN) stock from Market Perform to Underperform and significantly lowered its price target from $9.00 to $4.00. The downgrade follows concerns regarding potential legislative changes that could affect the company’s business model. The stock, currently trading at $10.66, has already fallen 17% in the past week. InvestingPro data reveals concerning fundamentals, including a debt-to-equity ratio of 5.23 and significant cash burn issues.
BMO Capital Markets cited the possible revisions to the "One Big Beautiful Bill Act" as a key reason for the downgrade. According to the firm, these changes, if enacted, could threaten Sunrun’s ability to claim the solar Investment Tax Credit ( ITC (NSE:ITC)) on residential solar leases under Section 48E beyond fiscal year 2025. With an EBITDA of $135.44 million and a market capitalization of $2.44 billion, the company’s ability to manage its significant debt burden could be further strained by these potential changes.
The analyst from BMO Capital Markets noted that while the bill has not been finalized and could see various changes in the Senate, recent developments indicate a lack of political support for maintaining residential credits. This observation comes in the wake of last week’s draft, which proposed the elimination of Section 25D residential credits.
The firm’s revised price target of $4.00 per share, down from the previous target of $9.00, reflects the growing uncertainty surrounding the legislative environment for solar energy incentives. The analyst emphasized that Sunrun’s business could be significantly impacted if the current draft of the bill is approved without the residential solar lease credits.
As the legislative process continues, the situation remains fluid, and the final outcome of the bill is still uncertain. Sunrun’s stock performance and future financial projections may hinge on these legislative developments and their eventual impact on the solar industry’s incentive programs. While InvestingPro analysis suggests the stock is currently undervalued, investors should note that 14 additional ProTips and comprehensive financial metrics are available to help navigate this volatile situation.
In other recent news, Sunrun has seen several key developments that may interest investors. UBS has raised its price target for Sunrun to $17, maintaining a Buy rating, citing favorable changes in renewable energy tax credit policies. Similarly, Mizuho (NYSE:MFG) increased its price target to $16, retaining an Outperform rating, following Sunrun’s first-quarter performance that generated $56 million in cash. The company reaffirmed its cash generation target of $200-500 million for 2025, despite potential tariff impacts.
Goldman Sachs also raised its price target to $15, maintaining a Buy rating, based on a net asset value approach that considers future installations. JPMorgan continues to hold a $13 target, emphasizing the impact of the Investment Tax Credit revisions on Sunrun’s financial framework. Barclays (LON:BARC) maintained its Equalweight rating with a $15 target, noting Sunrun’s improved demand outlook and stronger-than-expected cash generation of $56 million for the quarter.
Sunrun’s new Flex (NASDAQ:FLEX) product, aimed at enhancing solar sales, has been positively received, contributing to the company’s optimistic customer growth projections. These updates reflect a broad consensus among analysts that Sunrun is well-positioned to navigate the evolving landscape of renewable energy incentives.
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