Sunrun
stock surged higher early Thursday after the country’s largest residential solar developer reported a surprise profit. But it’s not quite the ray of sunshine for the sector investors might think.
Solar stocks are having a tough earnings season so far.
SolarEdge Technologies
(ticker: SEDG) issued a disappointing forecast for revenue on Wednesday, sending the stock down 18% in its worst daily performance in nearly a year.
Enphase Energy
(ENPH) and
SunPower Corp
(SPWR) also warned of weakening demand last week.
However,
Sunrun’s
(RUN) earnings addressed some concerns that have weighed on the shares. The stock rallied 15% in early trading.
Sunrun’s biggest market is California, and solar adoption there has slowed in recent months because the state reduced the amount of money residential solar customers can make from selling their excess power back to the grid. While Sunrun says the volume of new customers is poised to slow down, the company has been able to convince more customers to install battery power with their solar panels, an upsell that will boost the company’s revenue, according to CEO Mary Powell. Customers elsewhere are increasingly choosing batteries too.
“Our leading position in providing a backup storage offering to customers generates superior and expanding margins and market share gain opportunity,” she said on the earnings call.
In contrast to its peers, Sunrun’s forecasts didn’t disappoint investors. But that’s because the company didn’t issue specific calls on earnings or revenue. Instead, Sunrun said it expects growth in the power-generation capacity its customers have installed to to be between 10% and 15% for the full year. The net value of the subscriber base is expected to be materially higher in the second half than in the first.
Perhaps significantly, though, there were no warnings about demand.
The company reported a surprise profit of $55.5 million, or 25 cents per share in the second quarter. Analysts were expecting an adjusted loss of 24 cents per share, according to FactSet. Total revenue rose 1% to $590 million, but missed analysts’ estimates of $628 million.
After the recent gloom surrounding solar stocks, Sunrun’s earnings must be considered good news. It’s just not going to do much to lift the broader sector.
Write to Callum Keown at callum.keown@barrons.com
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