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Sunrun Shines on Morgan Stanley Price Target Hike

Sunrun is 'the most compelling clean energy stock we cover,' a Morgan Stanley analyst says.

Sunrun  (RUN) - Get Report was beaming Wednesday after a Morgan Stanley analyst raised his price target on shares of the rooftop-solar company to a Wall Street high of $91 from $86.

Shares of the San Francisco company were up nearly 12.6% to $48.61.

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"We view Sunrun as the most compelling clean energy stock we cover," said analyst Stephen Byrd, who has an overweight rating on the stock, "driven by minimal growth reflected in the stock, a growing 'economic wedge,' low financing costs, consumer demand for reliability, and the convergence EVs and renewables."

The analyst said in a research note that he believes the rapid growth in the adoption of electric vehicles "will be a major source of upside" for the company and that adoption by EV customers of rooftop solar could create as much value for Sunrun as the company's entire current business.

"Sunrun is a beneficiary of several megatrends," Byrd said, "rising utility costs and falling clean energy and storage costs, grid reliability impacts from climate change and consumer demand for clean energy."

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Byrd said he was "especially positive" about the agreement between Sunrun and Ford  (F) - Get Report, in which Sunrun became the home charging and integration systems provider for Ford's electric pickup truck, the F-150 Lightning.

The analyst said he sees compelling value creation driven by high overlap between EV buyers and consumers interested in adopting clean energy to power their home and electric vehicles.

Byrd said his price target reflects no additional value creation from EV customer adoption of rooftop solar; rapid customer growth, but falling margins later in the decade as greater competition reduces returns and other factors.

"We are unashamedly bullish about customer contract renewal value," Byrd said, noting that 75% of customers opt to renew their contracts at 75% of the current price.

In May, Sunrun reported a narrower loss for the first quarter and boosted its full-year guidance. 

The stock was upgraded in April to overweight from neutral at Piper Sandler.