Considering an addition to your clean energy holdings? If so, you might want to take a look at Sunrun (NASDAQ:RUN) stock.
There are concerns about the near-term trajectory of the U.S. residential solar market, which Sunrun specializes in serving. So, RUN stock gets a “B” instead of an “A” rating. Still, financial traders can invest in Sunrun as long as they understand the risks involved.
As CEO Mary Powell put it, Sunrun uses a “clean energy as a subscription” business model. This “allows customers to leverage, and stack, the latest innovative energy technologies to power their homes and cars while providing them an opportunity to save money.”
With this business framework, Sunrun has emerged as the U.S. residential solar market leader, with a share of around 18% of that market. Yet, RUN stock has been stuck in neutral for a while, though this may be a temporary slump as Sunrun’s user base is growing quickly.
What’s Happening with RUN Stock?
To be honest, the Sunrun share price has flopped around but gone practically nowhere over the past year. Plus, the company doesn’t pay a dividend, so there’s no consolation prize for loyal Sunrun investors.
Even though RUN stock has been stuck in the mud, this doesn’t mean the company isn’t thriving. As Powell observed, Sunrun “grew new installations by 17% year-over-year, deploying 256 megawatts, exceeding the midpoint of our guidance” during 2022’s third quarter. Moreover, Sunrun achieved these results despite the damage done by hurricanes in Florida and Puerto Rico.
Most encouraging of all, however, is Sunrun’s user base expansion. The company just keeps on growing its user count, quarter after quarter. And in Q3 of 2022, Sunrun increased its total customers by 21% on a year-over-year basis, to 759,937.
Slowing Demand in U.S. Residential Solar Industry Is a Concern
Now, we want to be fair and balanced, so we can’t ignore the comments recently made by Barclays analysts. They’re reportedly concerned about a slowdown in U.S. residential solar demand, which could affect Sunrun’s business.
Per Barron’s, Barclays analysts expect “overall U.S. residential growth” to be “in the mid-teens range” this year. However, this industry’s growth “could be more muted” in 2024 “as the impact of recent changes to the Net Energy Metering solar tariff won’t be felt until year-end 2023 and the first half of 2024.”
That’s a fair point, and prospective RUN stock investors should heed the analysts’ cautionary note. Still, Sunrun could thrive in the long run. After all, Sunrun projects “15% annual industry growth for the next 10 years” in the residential solar market.
Let’s also bear in mind the impact of the Inflation Reduction Act, which allocates hundreds of billions of dollars toward clean-energy initiatives. As you may recall, President Biden reminded the public of his commitment to clean-energy incentives during his most recent State of the Union address.
DataTrek Research analyst/strategist Jessica Rabe probably isn’t losing sleep over any near-term risks posed to new-energy businesses like Sunrun. “Ultimately, we think clean energy is outperforming because it is a growth industry with continued policy and geopolitical tailwinds,” Rabe commented.
What You Can Do Now
On one hand, you’ve got the tailwind of the Inflation Reduction Act, plus Sunrun’s robust user base growth. On the other hand, there’s a potential obstacle to consider. Specifically, Barclays analysts warned investors about a potential slowdown in the market in which Sunrun operates.
Clearly, there’s a lot to consider here. The overall balance appears to be in Sunrun’s favor, though. Despite any industry-wide problems, Sunrun continues to gain new users and install more solar systems. Therefore, after conducting your own due diligence, you might consider a long-term position in RUN stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.