Why Deutsche Bank Is Buying Sunrun

Deutsche Bank’s Vishal Shah initiated coverage of Sunrun Inc RUN with a Buy rating and price target of $15.

Rapid Growth

According to the Deutsche Bank report, “Sunrun is one of the fastest growing solar leasing providers in the U.S. and is poised to benefit from accelerated adoption of solar in the U.S. as an increasing number of states achieve grid parity over the next 5 years.”

Analyst Vishal Shah also mentioned that the company has a differentiated business model, which along with the improving cost structure and the attractive stock valuation, make Sunrun among the most favourable risk/reward profiles in Deutsche Bank’s coverage.

Regulatory/Financing Concerns

However, Shah also pointed out that net metering policy changes across several stated in the U.S., as well as the difficulty that some companies have been facing in getting ANS financing and the lack of public market transactions of residential operating assets, has led to the weak performance of solar leasing stocks, despite robust underlying demand.

“RUN does not have exposure to the commercial segment…and also does not rely on ABS markets for financing future growth,” Shah noted, while adding, “We also believe state-level regulatory headwinds are largely priced into the shares at current valuations and do not anticipate any meaningful negative catalyst from net metering policy decisions near term.”