Sunrun Inc (NASDAQ: RUN) has been a major disappointment for investors in recent weeks, but a senior analyst at UBS remains convinced that the ongoing sell-off in this solar stock has gone a bit too far.
According to Jon Windham, Sunrun’s stock price crash has created an opportunity to load up on a clean energy name that could weather the risks associated with President Trump’s new budget bill.
Note that Sunrun stock, despite the aforementioned hit, remains up some 30% versus its YTD low.
UBS sees upside in Sunrun stock to $12
Windham reiterated his “buy” rating on Sunrun shares this morning but lowered the price target to $12 to reflect a sector headwind linked to the House passing the “One Big Beautiful Bill Act” last week.
Investors have been bailing on clean energy stocks under the Trump administration this year as its new budget bill proposes removing significant tax credits for solar companies by the end of 2025.
These investment tax credits under the Biden-era Inflation Reduction Act (IRA) incentivized homeowners to install solar panels in pursuit of lower electricity costs.
That’s why the Invesco Solar ETF has lost a little under 15% year-to-date.
However, RUN shares could still navigate this storm and soar up to 75% from here, said the UBS analyst in his latest note to clients.
How may RUN shares navigate the new budget bill?
In his report, Jon Windham said his downwardly revised price target on Sunrun stock reflects the potential risk of the White House removing all federal tax credits for residential solar.
However, he maintained a positive view on the stock, noting that Sunrun could mitigate the impact of such regulatory headwinds through state-level incentives and expansion into other segments, including commercial, industrial, and community solar markets.
Additionally, Sunrun Inc could adjust its Power Purchase Agreements as well to better adapt to the regulatory shift, the UBS analyst argued in his research note.
Note that RUN shares do not pay a dividend at the time of writing.
Sunrun reported strong financials for its Q1
Windham also signalled the possibility of the US Senate reversing its stance on the aforementioned bill in his report as well.
He’s positive on RUN shares on the company’s “underlying $2.6 billion portfolio of contracted net earning assets.”
Moreover, the analyst also sees “potential upside scenarios beyond the US budget bill”.
Sunrun stock may be worth owning for continued strength in its financials.
Earlier in May, the Nasdaq-listed firm reported $504 million in revenue and earnings of 20 cents per share for its fiscal first quarter.
That handily beat analyst expectations, which had projected around $494 million in revenue and a loss of 22 cents per share for the clean energy firm.
That’s why the consensus rating on RUN remains an “overweight” at writing.
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