In the midst of a contentious election cycle, solar companies like Sunrun (NASDAQ:RUN) have come into focus. Daily trading volumes on Sunrun stock are in the millions. Plus, the company is a hot topic (no pun intended) on financial message boards.
Folks can argue all day long about which politicians would be better for solar stocks like Sunrun. Yet, I don’t try to anticipate political outcomes or base my investments on what any particular politician might or might not do. To me, that’s not a winning strategy.
Instead, I would rather examine Sunrun as a company as well as the solar market in general. My research tends to find that there is a bright future for a company like Sunrun, but not necessarily for the most obvious reasons.
Moreover, given the recent price action of Sunrun stock, value hunters might find the stock to be more attractive than it’s been in a while. So, let’s look past the political wrangling for a moment or two as we assess Sunrun’s current value proposition for investors.
A Closer Look at Sunrun Stock
During the onset of the novel coronavirus in the U.S., Sunrun stock came under tremendous pressure. Starting in late February, the share price tumbled from $23 to a gut-wrenching 52-week low of $7.84.
It takes real fortitude to stay in the trade after a drawdown of that magnitude. Patient investors were richly rewarded, however, as Sunrun stock turned around and staged a massive run-up.
Incredibly, Sunrun stock peaked at $82.42 in early October. This was probably too steep of an ascent and a retracement was practically inevitable. Thus, the stock price declined to the $52 area by October’s end.
This cooling-off period should be viewed favorably by value-oriented investors. The last thing you want to do is chase a stock after it has gone parabolic. Now at a more reasonable price point, Sunrun stock appears to offer a prime dip-buying opportunity.
Big Fish, Small Pond
In what was probably October’s biggest solar-market news story, Sunrun officially finalized its acquisition of Vivint Solar.
The combined company is unquestionably a front-runner in the clean-energy movement:
- Enterprise value of approximately $22 billion
- Over 500,000 customers
- 3 gigawatts of solar energy capacity
- Annual cost synergies of approximately $90 million over 12 to 18 months
- Post-closing market capitalization of roughly $17 billion
With such a massive size and value, it’s hard to imagine that Sunrun would struggle under any presidential administration.
To steal a metaphor from Louis Navellier and the InvestorPlace research staff, the Sunrun-Vivint business combination is effectively creating a big fish in a small but growing pond.
Energy Security in Focus
That pond could indeed grow much bigger as the U.S. residential solar market has only achieved a 3% penetration rate. Moreover, there’s a fascinating and perhaps unexpected trend in 2020 that could provide an additional tailwind to the residential solar industry.
This trend revolves around the concept of energy security. Consider the statistic that in 2020, according to Sunrun’s research, one in three surveyed Americans have reportedly either experienced a blackout or expect to experience a blackout in the near future.
There’s a Covid-19 connection here because more people are staying at home and that means there’s been an increase in electricity usage. In fact, 62% of surveyed homeowners said that the coronavirus has increased the demand for electricity.
CEO Lynn Jurich helps us connect the dots as to how this could benefit Sunrun:
“Homeowners across the country, but especially in California, are worried about how power outages are going to impact their ability to work remotely and help their kids with school… People need more reliable, affordable energy solutions like home solar paired with rechargeable batteries to make their home a safe haven.”
Again, this argument holds up regardless of who’s in the White House. I expect energy security to persist as a top-of-mind issue in the U.S. and worldwide. It’s worrisome, sure, but it’s also bullish for Sunrun stock.
The Bottom Line
Hopefully I’ve successfully avoided political strife and laid down a strong case in favor of holding Sunrun stock.
With Sunrun growing in size and energy security continuing to be an issue of significance, I believe we can all put our differences aside and see the potential upside for Sunrun stock now.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
