Sunrun Upgrade to Hold from Sell by GLJ Research Following US Treasury Guidance

Sunrun was upgraded to Hold from Sell at GLJ Research due to favorable guidance from the U.S. Treasury Department, which allows residential solar companies to claim tax credits as long as they can prove continuous work. This is seen as a positive development for the residential solar space.

GLJ Research has upgraded Sunrun (NASDAQ: RUN) from a 'Sell' rating to 'Hold,' citing favorable guidance from the U.S. Treasury Department for the residential solar sector. The upgrade comes as the Trump administration's Treasury Department released new rules that allow residential solar companies to claim tax credits as long as they can prove continuous work [1].

Sunrun, currently trading at $13.90, has experienced significant volatility, declining by 46% over the past year. The new guidance from the Treasury Department is seen as a positive development for the residential solar sector, as many industry observers had expected the Trump administration to eliminate a tax credit loophole [1].

The loophole in question allows residential solar companies to claim tax credits for projects several years into the future, with a potential Safe Harbor cutoff date of August 17, 2025. Contrary to these expectations, the Trump administration's Treasury Department did not restrict these tax benefits, which could be crucial for Sunrun's financial outlook [1].

Sunrun's second-quarter earnings report revealed a revenue of $569.3 million, marking an 8.7% year-over-year growth and surpassing consensus estimates of $559 million. Mizuho raised its price target to $25 following the earnings release, citing Sunrun's success in exceeding expectations for solar and storage additions and an increase in its contracted net value creation margin [1].

UBS adjusted its price target to $16, reflecting revised forecasts for Sunrun's solar capacity deployments for the coming years. Freedom Broker increased its price target to $14.50, maintaining a Hold rating, following the earnings release. Wells Fargo updated its price target to $14, emphasizing a new valuation framework based on cash generation and terminal value. BMO Capital raised its target to $10, although it maintained an Underperform rating, noting strong performance in key areas but highlighting a shortfall in quarterly cash generation [1].

The new Treasury Department guidance comes as a relief to developers, who had been anxious about the potential impact of the One Big Beautiful Bill Act on their projects. The act established new deadlines for wind and solar development, allowing projects that start construction before the end of this year to qualify for the tax credits as they currently stand. However, projects that start construction between January 1 and July 4 of 2026 will have to follow stringent new rules limiting the use of materials with ties to China [2].

The Treasury Department's relative restraint in the new guidance has been seen as a positive development for the renewable energy sector. "It’s not good, it’s not helpful, but from my perspective, the guidance could have been a lot worse," David Burton, a partner at Norton Rose Fulbright who specializes in energy tax credits, told Heatmap [2].

References:
[1] https://www.investing.com/news/analyst-ratings/sunrun-stock-rating-upgraded-to-hold-from-sell-by-glj-research-93CH-4196005
[2] https://heatmap.news/energy/start-construction-treasury-guidance