Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Long Ideas

Is Sunrun (RUN) Making Money?

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One company that could prosper during a Joe Biden (D-Delaware) administration could be Sunrun Inc. (NASDAQ: RUN).

Sunrun (RUN) installs solar panels, batteries, and solar power systems in homes and businesses. President-elect Biden’s energy plan could help Sunrun by offering tax credits to households to families that install solar systems.

Sunrun installs solar systems in 24 states and the District of Colombia. Moreover, Sunrun’s Brightbox home battery system is now available in all 22 of the markets it serves.

Brightbox, Sunrun’s answer to Tesla’s (TSLA) Powerwall, stores electricity solar panels generate. The Brightbox allows people to run their computers, refrigerators, and other devices when power goes out and to solar generated electricity for later use. Sunrun claims to have installed over 13,000 Brightbox systems nationwide.

Does Sunrun Make Money?

Sunrun (RUN) is a good barometer for the solar economy because it claims to install a solar system every 2.3 minutes.

Presently, Sunrun loses money. It reported a -$62.19 million operating loss on 30 September 2020. The quarterly operating loss rose from -$48.43 million on 31 December 2019 and fell from -$83.47 million on 30 June 2020.

Sunrun reported a quarterly gross profit of $56.73 million on 30 September 2020. The quarterly gross profit fell from $61.73 million on 31 December 2019 and rose from $34.13 million on 30 June 2020.

Moreover, Sunrun’s quarterly revenues fell from $243.94 million on 31 December 2019 to $209.76 million on 30 September 2020. The quarterly revenues rose from $181.29 million on 30 June 2020.

September 2020 and 11.39% on 30 June 2020. In contrast, Sunrun’s revenues grew by 8.34% in the quarter ending on 31 March 2020.

Sunrun Burns Cash

Notably, Sunrun (RUN) burns cash instead of generating it. Sunrun reported a quarterly negative operating cash flow of -$14.51 million on 30 September 2020.

The quarterly operating cash flow rose from -$35.37 million on 30 June 2020 and -$98.38 million on 31 December 2019. Sunrun reported a $27.28 million ending cash flow on 30 September 2020.

Unfortunately, I think the ending cash flow comes from borrowing money. Sunrun reported a financing cash flow of $364.12 million on 30 September 2020. The quarterly financing cash flow grew from $177.30 million on 30 June 2020.

I think Sunrun borrowed $364.12 million to finance its operations in the last quarter. Hence, Sunrun is not making enough money to pay for its operations.

What Value Does Sunrun have?  

Sunrun (NASDAQ: RUN) offers some value. Sunrun had $381.37 million in cash and short-term investments and $6.306 billion in total assets on 30 September 2020. Sunrun is gaining value because the total assets rose from $6.005 billion on 30 June 2020.

Sunrun has 4,000 employees that make installations in 175 US cities. Sunrun receives some help from the government. The state of Arizona offers a $1,000 solar energy credit, for instance.

Sunrun claims to be the largest dedicated solar company in the United States. Sunrun makes money leasing and selling solar equipment. Sunrun customers can lease systems on a monthly basis. Sunrun also lends money to buyers.

Thus, Sunrun is a finance company that could generate float. Float is a constant stream of money that companies can always tap or borrow against. Float comes from payments customers have to make; such as insurance premiums or leases. Sunrun’s leases could be a source of float.

Investors need to Avoid Sunrun

Sunrun has experienced tremendous share value growth in 2020. Sunrun’s shares began 2020 at $14.19 and rose to $53.59 on 10 November 2020 to $55.40 on 13 November 2020. Sunrun shares hit a high of $79.97 on 1 October 2020.

I think Mr. Market overvalued Sunrun at $55.40 on 13 November 2020. I consider Sunrun overvalued because it loses money.

Predictably, Sunrun (RUN) pays no dividend. Hence, it offers investors no margin of safety. Therefore, I think investors need to avoid Sunrun until it generates enormous amounts of cash from its solar panel leases. Until then, Sunrun is a company that could collapse.

I think investors to avoid Sunrun because it loses money and has no margin of safety. Moreover, I think Sunrun’s finances show the home solar industry will not make money for the foreseeable future. However, a Sunrun system could be a wise investment for home or property owners.