Goldman Still Neutral On Sunrun: Here's Why

Goldman Sachs’ Brian Lee maintained a Neutral rating for Sunrun Inc RUN, with a price target of $7. He mentioned the key takeaways from a meeting with the company’s Chairmen Ed Fenster on March 17.

Ample Liquidity, Limited Leverage

While the solar segment has been facing balance sheet and leverage concerns, Sunrun has $213mn of cash on its balance sheet and recourse debt of $195mn on a WC facility. Management indicated that it aims at maintaining this characteristic and that the company would not need an equity raise in the medium term.

Internal Focus Of Being Cash Flow Positive In Year 1

“Without specifying a timetable, Sunrun is driving to reach the point where up-front proceeds, including non-recourse debt and tax equity match the cost of creation,” analyst Brian Lee wrote.

The company currently receives average upfront proceeds of about $3.25/W and incurs $3.64/W in total costs as of 4Q15. Given targeted cost cuts, the crossover period could be in the next 9-12 months, further reducing concerns over the need for an equity raise, the analyst mentioned.

Price Increase Possible

The company is able to raise pricing across the board in 1Q16, with no negative impact in closing rates, since the competitive environment is favorable for Sunrun and utility rates have moved higher.