Bank Of America Upgrades Sunrun After Post-Q2 Pullback

Sunrun Inc RUN's notable move lower last week in reaction to the solar power company's second-quarter report put an end to Bank of America Merill Lynch's bearish stance on the stock.

The Analyst

BofA's Julien Dumoulin-Smith upgraded Sunrun from Underperform to Neutral with a price target lifted from $15 to $16.

The Thesis

Sunrun's mixed Q2 earnings report was accompanied by concerning third-quarter guidance, but the stock's sell-off is an "overreaction," Dumoulin-Smith said in the upgrade note. (See the analyst's track record here.) 

The solar company's outlook shows increasing confidence in its full-year deployment growth target of 15 percent and an even higher figure the following year, the analyst said. 

Sunrun's deployment guidance of 213 megawatts for the bottom half of 2018 implies a 21-percent year-over-year growth rate, Dumoulin-Smith said. A 15-percent growth rate is the minimum required for the stock to see any upside, the analyst said. 

Sunrun still faces "sizable execution risk" in achieving its Q3 guidance and "slight" cost reduction guidance for 2019, the analyst said. 

Price Action

Sunrun shares were trading up 1.17 percent to $13.44 at the time of publication Monday. 

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