Sunrun Shines as Morgan Stanley Lauds Managers, Cost Controls

Morgan Stanley upgraded Sunrun, saying the solar-energy company's management team has 'a strong execution track record.'
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Sunrun  (RUN) - Get Report stock was beaming on Wednesday after Morgan Stanley analysts upgraded the San Francisco solar energy company to overweight from equal-weight.

Analyst Stephen Byrd cut his price target on Sunrun to $86 from $89. The shares at last check were 12% higher at $60.02.

Byrd said in a note to investors that the stock at this price was a compelling value driven by several factors, including a management team with a strong execution track record and a rapidly growing "economic wedge" between incumbent utility costs and the company's falling cost structure.

Sunrun is also a key beneficiary of upcoming clean-energy legislation, Byrd said, which he expects to include a tax credit for energy storage. 

"[An] underappreciated upcoming catalyst is likely federal legislation that will provide further support for the clean-energy sector," he said.

He also cited surging consumer interest in both rooftop solar and energy storage given issues surrounding the reliability of the grid. 

And he noted that credit spreads on Sunrun's debt financing were falling, which will serve to offset headwinds from rising interest rates.

Byrd also recommends other stocks with strong growth and cash flow, such as AES  (AES) - Get Report, Atlantica Sustainable AY, SolarEdge  (SEDG) - Get Report and TPI Composites  (TPIC) - Get Report.

The analyst said he was reducing his price targets due to higher cost of capital, but he continues "to see strong industry fundamentals and policy support ahead."

"We believe the significant pullback in stock prices across the cleantech industry represents a rare buying opportunity, with relatively modest growth now implied in many stocks," he wrote.

On Tuesday UBS analyst Jon Windham upgraded Sunrun to neutral from sell. The analyst said he saw a more balanced risk/reward opportunity after the stock corrected more than 50% from its 2021 highs.