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Growing solar panel installations and a smart play around interest rates are set to propel shares of Sunrun higher, according to Guggenheim. Analyst Joseph Osha reiterated his buy rating for the residential solar company in a note Thursday and raised his price target to $36 from $35. That implies a 152% upside from the stock’s closing price of $14.26 Wednesday afternoon. “We believe that RUN should be the best-performing of the residential solar developer stocks for this year and next,” Osha wrote. Osha’s upgrade comes even as Sunrun shares have plummeted almost 44% in 2023, underperforming even the Invesco Solar ETF (TAN) , which is down 26% during that time. But while solar companies have been plagued in recent months by rising interest rates and solar compensation cutbacks in California , the analyst thinks Sunrun still has a bright growth outlook due to its ability to grow its market share. RUN YTD mountain Sunrun YTD chart “We have a higher level of confidence in RUN’s ability to grow MW [megawatt] installations next year, even as the overall US residential industry declines by 3% in 2024, according to our estimates,” the analyst said. “Our 9% outlook for RUN’s MW installations is moderately above consensus.” Although Sunrun’s working capital will offset any cash generation in 2023, Osha said tailwinds from the Inflation Reduction Act and the offload of working capital will drive better cash generation for the company next year. He also highlighted Sunrun’s strategy of avoiding expensive debt at the cost of near-term market share gain. “Considering the interest rate environment that solar developers currently face, and what we believe is going to be a growing focus on liquidity and leverage, we believe that RUN’s strategy is the right one, even if the company leaves some growth on the table for the intermediate term,” Osha wrote. “It makes far more sense in our view to grow in a manner that does not create an unreasonably leveraged balance sheet, which is what RUN is doing.” — CNBC’s Michael Bloom contributed to this report.
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