4. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 27
Number of Billionaire Investors: 10
Sunrun Inc. (NASDAQ:RUN) is involved in multiple aspects of residential solar energy systems. The company’s activities include designing, developing, installing, selling, owning, and maintaining these solar energy systems. In Q1 2023, 10 billionaires held positions in Sunrun Inc. (NASDAQ:RUN).
On May 8, Truist analyst Jordan Levy maintained a Buy rating on Sunrun Inc. (NASDAQ:RUN) but trimmed the firm’s price target on the shares from $35 to $30. The stock’s decline after Sunrun Inc. (NASDAQ:RUN) reported a larger than expected loss in Q1 can be attributed to increased spending, unchanged growth projections, the absence of detailed guidance, and general concerns about interest rates. Truist acknowledged a slowdown in California, but believes that Sunrun Inc. (NASDAQ:RUN)’s sales efforts in Q1 will continue to generate momentum throughout the majority of the second half of the year, as non-California regions show signs of strong activity.
According to Insider Monkey’s first quarter database, 27 hedge funds were bullish on Sunrun Inc. (NASDAQ:RUN), compared to 39 funds in the prior quarter. Billionaire Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with a position worth $77.5 million.
Here is what Horizon Kinetics has to say about Sunrun Inc. (NASDAQ:RUN) in its Q2 2021 investor letter:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%. (Click here to read full text)
