Sunrun Stock To $7?
Sunrun (NASDAQ: RUN) is the leading residential solar installer in the U.S. based on market share. The company's position has become increasingly unstable due to a mix of policy changes, financial pressures, and shifting market dynamics.
There's more to consider – With a market capitalization of $2.5 billion, Sunrun has experienced a 36% loss of value over the last year. Investors need to recognize the company's susceptibility to economic downturns, which was evident during the Covid-19 crisis when its stock fell by about 40% in just a few quarters. This historical context raises the possibility that Sunrun's current share price of $11 might decline to approximately $7 if similar market conditions arise again. Nevertheless, for investors aiming for lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and delivered returns that exceed 91% since its inception. Separately, see Is Intel Stock A Buy Now?
Why Is It Relevant Now?
Recent actions from both the legislative and executive branches have sped up the expiration of important federal tax credits—namely, the 25D Residential Solar Credit and the 48E Investment Tax Credit—shortening the opportunity for Sunrun to take advantage of these vital incentives. An executive order enacted on July 8 complicates the situation further by redefining the term 'under construction,' introducing new compliance challenges. Concurrently, the imposition of substantial tariffs on imported solar equipment jeopardizes cost structures and profit margins.
These changes fundamentally impact Sunrun's business model, which heavily relies on tax credits to back its leasing and power purchase agreements. As these incentives wane and operational costs escalate, the company's capability to sustain competitive pricing and profitability is increasingly at risk.
How resilient is RUN stock during a downturn?
Historically, Sunrun has lagged behind the S&P 500 during market downturns, underscoring its vulnerability to macroeconomic shocks. In the 2022 inflation-driven selloff, RUN tumbled 67.4%, significantly worse than the S&P 500's 25.4% decline, and it has not yet regained its previous highs, presently trading around $10.90. In the downturn triggered by Covid, RUN dropped 38.7% but bounced back swiftly. While the stock can recover, its historical performance indicates high volatility and limited downside resilience. Our dashboard How Low Can Stocks Go During A Market Crash captures the performance of key stocks during and after the last six market crashes.
Protecting Wealth
No longer merely a solar stock, Sunrun now serves as a high-stakes indicator of the trajectory for rooftop solar as federal policy shifts become less predictable. Although the company is actively adapting—expanding into energy storage, changing billing models, and tweaking its supply chain—investors continue to be concerned about the pace and effectiveness of these strategic adjustments. With increasing regulatory challenges and expiring incentives, the market is closely monitoring whether Sunrun can adjust quickly enough to maintain growth and protect its margins.
RUN stock is currently trading at 1.1x price-to-sales, below its 3-year average of 1.5x and considerably less than the S&P 500 average of 3.1x. While this might imply a discount, it does not categorize it as 'deep value.' Sunrun continues to be valued as a growth company, and when growth appears uncertain, justifying that premium becomes more difficult. Considering the wider economic uncertainties, ask yourself the question: Do you wish to retain Sunrun stock now? Would you feel compelled to sell if it begins to decline to $8, $7, or even lower? Holding onto a declining stock is never easy. Trefis collaborates with Empirical Asset Management—a Boston-based wealth manager—whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has integrated the Trefis HQ Portfolio into this asset allocation strategy to offer clients better returns with reduced risk compared to the benchmark index; providing a less turbulent experience, as demonstrated in the HQ Portfolio performance metrics.
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