UBS Slashes Sunrun Inc. (RUN) Target as Solar Tax Perks Fade

UBS analyst Jon Windham has cut Sunrun Inc. (NASDAQ:RUN)’s price target to $12.00 from $17.00 while still maintaining a ‘Buy’ rating on the stock. The stock has recently witnessed extreme volatility, with analyst targets between $4 and $20. If viewed closely, the stock, currently trading at $7.34, tells a cautionary tale. Having experienced a decline of around 50% in the past year, the road ahead for Sunrun Inc. (NASDAQ:RUN) looks equally unconvincing.

The price cut follows the U.S. House’s May 22 budget bill, which proposes phasing out the Investment Tax Credit for residential solar projects.

Why Sunrun Inc. (RUN) Crashed Today

A field of solar panels glistening in the afternoon sun, symbolizing the company’s renewable energy ambitions.

Sunrun Inc. (NASDAQ:RUN) is a U.S.-based provider of residential solar energy systems, battery storage, and related services. With the ITC acting as a leading player in minimizing electricity costs for homeowners investing in solar systems, removing this tax can translate to lower annual installations.

Even in this inconsistent policy landscape, the ‘Buy’ rating by UBS for the solar powerhouse is based on the possibility of the current bill allowing residential solar projects to continue benefiting from the ITC through pooled residential Power Purchase Agreements (PPA), corresponding to the SUNRUN strategies.

Having said that, the business model of the company is such that it is heavily dependent on tax credits and non-recourse debt, making Sunrun Inc. (NASDAQ:RUN) vulnerable to legislative changes and tariff imposition. The threat to eliminate key tax credits undermines the company’s economics in many markets, dimming hopes of sustained profitability.

While we acknowledge the potential of RUN to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than RUN and that has 100x upside potential, check out our report about this cheapest AI stock.

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