Deutsche Bank Starts Sunrun (RUN) at Buy with Price Target of $15

Deutsche Bank initiated coverage on Sunrun (NASDAQ: RUN) with a Buy rating and a price target of $15. Analyst Vishal Shah thinks shares have room to run.

"Sunrun is one of the fastest growing solar leasing providers in the U.S. and is poised to benefit from accelerated adoption of solar in the U.S. as an increasing number of states achieve grid parity over the next 5 years. Sunrun's differentiated business model, improving cost structure and attractive valuation makes it one of the most favorable risk/reward names in our coverage," said Shah.

The analyst continued,"Changes to net metering policies in several states, difficulty in securing ABS financing by some companies, and lack of public market transactions of resi operating assets have resulted in weak performance of solar leasing stocks despite strong underlying demand trends. RUN does not have exposure to the commercial segment which was one of the contributing factors to the weak performance for SolarCity (SCTY) and also does not rely on ABS markets for financing future growth. We also believe state-level regulatory headwinds are largely priced into the shares at current valuations and do not anticipate any meaningful negative catalyst from net metering policy decisions near term."

Shah added, "RUN's installation run-rate as of Q3'15 was comparable to SCTY's installation levels of Q2'13, which means RUN still has 9 quarters worth of growth left to reach SCTY's current levels. RUN's cost structure also improved significantly. The company has taken 61c out of costs over last 2 quarters and can easily achieve $2.50/W target by 2017, in our view. Finally, we believe RUN's valuation gap relative to SCTY is very compelling. Shares are trading at 2.2x value of current operating assets vs SCTY which is currently trading at 2.9x value of operating assets."

For an analyst ratings summary and ratings history on Sunrun click here. For more ratings news on Sunrun click here.

Shares of Sunrun closed at $6.65 yesterday.

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