Here’s Where to Nibble on Sunrun Stock

California-based solar energy solutions provider Sunrun NASDAQ: RUN stock has been a benefactor of the clean energy movement. The maker of residential solar energy management systems has seen its shares crumble in the recent fallout in alternative energy and electric vehicle (EV) stocks. The parabolic spike in the clean and renewable energy segment driven by the global decarbonization movement embraced by the Biden Administration has reversed into massive downdrafts as these stocks see declines of well over 50% off 2021 highs. Sunrun will continue to benefit from the extension of the Federal solar investment tax credit (ITC) rate of 26% through 2023. Its acquisition of Vivint Solar in July 2020 has increased its market share of the residential solar power market to nearly 20%. Sentiment in the solar energy segment has turned bearish but this sets the bar low again for the recovery cycle. Risk tolerant investors seeking exposure in the solar energy space can monitor opportunistic pullback levels to nibble on shares of Sunrun.        

Q1 2021 Earnings Release

On May 5, 2021, Sunrun released Q1 2021 results for the quarter ending in March 2021. The Company reported earnings per share (EPS) loss of (-$0.12) excluding non-recurring items, versus consensus analyst estimates for a profit of $0.02, a (-$0.14) miss. Revenues rose 58.9% year-over-year (YoY) to $334.79 million, beating analyst estimates for $323.93 million. Annual recurring revenues from subscribers was $683 million as of March 31, 2021. The Average Contract Life Remaining of Subscribers was $17.2 years at the end of the Q. The Company noted its new home business grew 50% YoY in Q1 and is starting to scale up thanks to the surge in the residential real estate market.

Full-Year 2021 Outlook

For full-year 2021, Sunrun expects Solar Energy Installed Capacity growth to range between 25% to 30%, up from 20% to 25%. Total Value Generated is expected above $750 million for full-year 2021, up from $700 million. Cost synergies from the Vivint Solar acquisition is expected around $120 million for the year. 

Conference Call Takeaways

Sunrun CEO, Lynn Jurich, set the tone, “We ended Q1 with more than 573,000 customers, reflecting 18% year-over-year growth. We are increasing our solar capacity installations guidance from 20% to 25% to 25% to 30% for the full-year. We are innovating, accelerating growth, and integrating Vivint Solar, while maintaining strong unit margins and performing at a scale that is two times greater than our nearest competitor. Sunrun’s expanding customer value proposition and competitive advantages are delivering market share gains. We delivered all-time record Q1 volumes through our direct-to-home sales channel. And our homebuilder and our channel partner businesses delivered all-time record volumes.” The Company grew its channel partners by 20% in Q1. Sunrun is working with 20 of the top 30 homebuilders in California spanning hundreds of communities. The Company installed nearly 20,000 of its Brightbox systems to help manage energy constraints during peak times in the U.S. Battery installations are expected to grow north of 100% in 2021.

Sunrun and EVs

The relationship with EVs and home solar energy systems may seem distant, but here’s how they are closer than you think. CEO Jurich pointed out, “We are actively exploring ways to help consumers and the grid manage the transition to electric vehicles… Sunrun will be a key enabler of this transition. Homes with EVs consume approximately double the amount of electricity. Home solar and batteries are needed to meet this increased strain on the electric system, and Sunrun is well-positioned to be a leading provider of these services, given our expertise managing and installing at-home energy infrastructure and our national footprint.” Over the next 30 years, the Company expects the solar systems deployed in Q1 2021 to prevent 3.9 million metric tons of CO2.

Multi-Decade Secular Tailwinds

On April 23, 2021, Morgan Stanley noted the multi-decade secular tailwinds are emerging thanks to the Biden Administration’s target for the U.S. to reduce domestic greenhouse gases by 50% to 52% by year 2030. Since the U.S. has lagged the European Union in its efforts, the firm expects more sweeping changes that will culminate into stringent regulatory policies for domestic energy. The firm listed Sunrun as one if its top picks to benefit from the impending policy changes. Prudent investors can monitor shares for opportunistic pullback levels to consider exposure.

RUN Opportunistic Pullback Levels  

Using the rifle charts on weekly and daily time frames provides a broader view of the landscape for RUN stock. The weekly uptrend peaked at the $100.93 Fibonacci (fib) level. Shares have been in down trending since the weekly market structure high (MSH) triggered on the breakdown under $79.41. The falling weekly 5 period moving average (MA) is at $48.78 with lower weekly Bollinger Bands (BBs) at the $25.35 fib area. The weekly stochastic formed stairstep mini inverse pups through the 20-band as each bounce attempt was deflected by the falling weekly 5-period MA. The weekly stochastic is oversold at the 10-band, but needs a coil back up through the daily market structure low (MSL) buy trigger above $46.97 to successfully cross back up.  The daily rifle chart is in a downtrend with a falling 5-period MA at $40.85 and lower BBs at the $33.09 fib. The daily stochastic crossed down on the rejection off the 20-band. Risk-tolerant investors can look for opportunistic pullback levels at the $36.18 fib, $33.09 fib, $30.11 fib, $27.49 fib, $25.35 fib, and the $22.01 fib. The upside trajectories range from the $5.70 fib up towards the $70.52 stinky 5s levels. Keep an eye on peer solar stocks FSLR, SPWR and JKS as they tend to move as a group.