On Wednesday, Sunrun Inc . (NASDAQ:RUN), a leading residential solar company, maintained its Hold rating and $18.00 stock price target from Truist Securities following the announcement of its third lease/power purchase agreement (PPA) securitization of the year.
Sunrun disclosed the details of the $365 million asset-backed securities (ABS) deal, which was priced with a weighted average spread of 234 basis points and a 5.8% coupon. The deal included two publicly placed A+ rated notes, with the A-1 notes at a 210 basis point spread and the A-2 notes at 240 basis points.
This latest securitization deal's spreads were slightly wider than those of Sunrun's previous transaction in June this year, which had a spread of 205 basis points. However, these spreads were still narrower than those seen in the most recent deal by competitor Sunnova Energy International Inc . (NYSE:NYSE:NOVA), which holds a Buy rating.
The securitization market is currently adjusting following the Chapter 11 filing of SunPower (OTC:SPWRQ) Corporation (NASDAQ:SPWR), which has caused some shifts in pricing.
Sunrun's new securitization deal also saw an advance rate of 73.8%, a slight increase from the 72.6% of its last securitization. The cumulative advance rate of the portfolio is expected to align with Sunrun's guided range after the placement of subordinated subsidiary-level non-recourse financing, which involves BB rated notes.
The completion of this securitization deal is significant for residential solar installation companies as it demonstrates that securitization pricing has not substantially worsened following SunPower's Chapter 11 filing. This development is anticipated to have positive implications for the sector, particularly with upcoming federal interest rate cuts.
In other recent news, Vistra Corp and Sunrun Inc. have launched the TXU Energy & Sunrun Battery Rewards program in Texas. The program aims to improve grid reliability by creating a virtual power plant with energy from residential solar-plus-battery systems.
Homeowners participating in the program will receive financial incentives while maintaining control over their systems during power outages or severe weather. Sunrun will manage the networking and discharging of stored solar power back to the grid.
Sunrun has also reported a record-setting performance for the second quarter of 2024, installing over 116,000 solar and storage systems. This achievement has significantly increased the company's net subscriber value and total value generated during the quarter, reaching $310 million. Financial services company, Jefferies, initiated coverage of Sunrun with a Buy rating, citing the company's promising cash generation forecast and potential for further monetization opportunities.
Sunrun has surpassed 1 million customers, marking a significant milestone in the clean energy sector. The company's growth is attributed to its innovative subscription-based model and recent shift to a storage-first strategy. Looking ahead, Sunrun plans to increase its storage installation guidance while narrowing its solar installation predictions for 2024.
Despite expecting a volume decline in the first quarter of the following year due to normal seasonality, the company anticipates that its transition to a storage-first approach will enhance margins and deliver increased value to customers.
InvestingPro Insights
As Sunrun Inc. (NASDAQ:RUN) navigates the complexities of the securitization market, recent data from InvestingPro provides a snapshot of the company's financial position. With a market capitalization of $4.54 billion, Sunrun is trading at a price-to-book ratio of 0.85 as of the last twelve months leading up to Q2 2024, which may suggest the stock is potentially undervalued relative to its assets. However, the company's significant debt burden, as indicated by an adjusted P/E ratio of -5.22, reflects challenges in profitability and the ability to manage its debt load.
InvestingPro Tips highlight that Sunrun's net income is expected to grow this year, which could signal a turning point for the company's financial health. Nonetheless, with analysts not anticipating profitability within the year and the company trading at a high revenue valuation multiple, investors should approach with caution. The stock has experienced a strong return over the last three months, with a 60.68% increase, and a large price uptick over the last six months, up 97.95%. This volatility might appeal to risk-tolerant investors looking for short-term gains.
For those considering an investment in Sunrun or seeking to understand the company's financial trajectory better, InvestingPro offers a total of 14 tips, providing detailed insights and analysis that could inform investment decisions. To explore these insights further, one can visit InvestingPro for a comprehensive view on Sunrun's financial metrics and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.