Sunrun Surges as Analyst Predicts Positive Cash Flow in 2017

  • Solar-storage systems are boosting demand, Dumoulin-Smith says
  • Vivint also climbs as threats to rooftop solar are ‘limited’

Sunrun Inc., the San Francisco-based residential-solar company, surged the most in 10 weeks after Bank of America Corp. said the company expects to be cash-flow positive by year-end.

Sunrun gained 6.9 percent to $6.04 at 11:07 a.m. in New York, the most intraday since Aug. 24.

The company is expanding into new markets and shifting its financing models so it can recognize more quickly the value of its rooftop power installations, Julien Dumoulin-Smith, a New York-based analyst at Bank of America, said in a research note Monday. That’s making Sunrun’s balance sheet stronger at a time when the U.S. residential solar market is slowing.

“Management intends to be cash flow positive by the end of the year, driven by increasing upfront recognition of total project value,” Dumoulin-Smith said in the note.

Sunrun has arranged multiple financing deals and lined up key partnerships, including an August marketing arrangement with Comcast Corp. The company is also offering storage systems to complement solar panels, a combination Dumoulin-Smith expects to be a key source of growth. He reinstated coverage with an $8 price target.

The company has been coy about when it expects to be cash-flow positive. Chairman Edward Fenster said in a March interview that while the company was seeking to boost its cash balance this year, focusing on cash flow for the current year might not be the best way to increase shareholder value over the long term. The company is targeting 15 percent growth in installations for 2017. Fenster declined to comment Monday.

Vivint Solar Inc., a rival rooftop-solar installer, also gained Monday after Dumoulin-Smith reinstated coverage with a $5 price target. The Lehi, Utah-based installer climbed 4 percent to $3.95.

“Despite concerns surrounding residential solar, including net energy metering, capital market dependency, long-term growth prospects, availability of tax credits, and rising interest rates, in our view immediate threats are limited,” Dumoulin-Smith said in a separate note. “We see shares trading at a discount even when accounting for substantial execution risk.”

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