2023-07-17 14:58:01 ET
Sunrun ( NASDAQ: RUN ) +12.7% and Altus Power ( NYSE: AMPS ) +13.1% respectively in Monday's trading, as Morgan Stanley called the two companies its preferred names in solar energy ahead of Q2 earnings season.
On Sunrun ( RUN ), Morgan Stanley analyst Andrew Percoco said he expects the company will achieve the middle of its 270-290 MW installations target in Q2 and model $12,921 NSV vs. the company's guidance for sequential growth off of $12K in Q1, and a "fairly constructive" update of the demand outlook on its Sunrun Shift product, supporting near-term market share gains in California, which could drive a positive full-year guidance revision.
On Altus Power ( AMPS ), Percoco sees "more upside opportunity than downside risk to the company's 2023 guidance" after it announced several strategic milestones and partnerships, after ending 2022 with $79M in annualized EBITDA and likely an additional $17M-$19M in 2023 from the True Green acquisition, "putting the company in reach of the low end of its guidance, before considering the additional assets it is putting in service this year."
Percoco forecasts the U.S. residential solar market will grow by 15% in 2023, decline 10% in 2024 and then inflecting 10% higher in 2025, "as the benefits of the IRA and lower hardware costs are fully realized."
The analyst said he continues to expect the large installers, particularly Sunrun ( RUN ), Sunnova ( NOVA ) and SunPower ( SPWR ), will gain share in this environment as they have established a cost of capital, balance sheet and supply chain advantage over the smaller players, but also lowered market growth expectations for the three installers to 5% Y/Y in 2024, compared with 10% previously, to represent a slowing southeast U.S. market and the lag effect of the NEM 3.0 pull-forward in 2023.
More on Sunrun:
- Financial and valuation comparison to sector peers
- Analysis: Sunrun: A Premium Way Too High To Pay For
- Stock price return: Down 16.5% YTD, down 22.5% in the past 12 months
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Sunrun, Altus Power surge as Morgan Stanley says top solar energy picks