Analyst: Sunrun Stock's Valuation "Tough to Ignore"

J.P. Morgan Securities also cut its price target

Deputy Editor
Oct 20, 2022 at 9:36 AM
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The shares of Sunrun Inc (NASDAQ:RUN) are down 3.4% to trade at $19.71 this morning, after Wolfe Research downgraded the solar company to "peer perform" from "outperform." The analyst said headwinds on financing costs and the stock's valuation are "tough to ignore despite strong demand growth" from the Inflation Reduction Action legislation, adding that stable rate/credit markets are needed before the shares can be considered. 

In addition, J.P. Morgan Securities cut its price target to $55 from $65 but kept its "overweight" rating. The firm said it expects demand to remain strong, but lowered price targets across the board amid concerns regarding the overall economy. Coming into today, 12 of 15 still considered Sunrun stock a "buy" or better, while the 12-month consensus target price of $47.65 is a 140.9% premium to last night's close.

Should today's losses hold, RUN will log its lowest close since May 13. The shares have moved wildly over the last 10 months, though pressure from the long-term 320-day moving average has weighed for much of 2022, putting the shares at a 40.5% year-to-date deficit. 

In the options pits, the stock's 50-day put/call volume ratio of 0.91 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 84% of readings from the last year. This means that though calls are still winning out on an absolute basis, the options pits have been much more bearish than usual. Echoing this, Sunrun stock's Schaeffer's put/call open interest ratio (SOIR) of 0.88 stands higher than 84% of annual readings. 

Should you want to speculate on the security with options, it's also worth noting the RUN's Schaeffer's Volatility Scorecard (SVS) ranks at a relatively high 94 out of 100. This suggests the stock has exceeded option traders' volatility expectations during the last year.


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