On Friday, UBS analyst Jon Windham upgraded Sunrun (NASDAQ:RUN) stock, listed on NASDAQ:RUN, from Neutral to Buy, raising the price target to $17.00, up from the previous target of $14.00. Windham cited several reasons for the positive outlook, including Sunrun's significant growth in market share within California and the increasing deployment of battery storage in new projects.
Sunrun's market share in California has nearly doubled over the past year, reaching 22%. This growth is partly due to the company's success in attaching battery storage to approximately 60% of its new projects. The deployment of storage solutions has surged by 126% year-over-year for the three months ending in November 2024, which has expanded the addressable market for the company.
Another factor contributing to the upgraded rating is the nature of residential solar projects, which are known for their short project cycles. This characteristic positions residential solar as a key player in providing new capacity to meet the current demands for load growth. Despite these emerging positive trends, Sunrun's shares have been trading below the net contracted assets reported in the third quarter of 2024, suggesting that the market has not yet priced in future growth.
Windham forecasts that the U.S. residential solar market will grow by 15% in 2025E. He also pointed out that the fate of renewable tax credits, which could be addressed in the budget reconciliation as early as March 2025, is a key catalyst for the shares.
Adjustments to the expiry dates of these tax credits are seen as more probable than a complete repeal, which would likely have a favorable impact on sector valuations, according to Windham.
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