Sunrun has further growth potential, according to Wells Fargo.
Analyst Michael Blum reaffirmed his overweight rating on the residential solar panel manufacturer and lifted his price target by $6 to $14.
The new target suggests around 28% potential upside from current levels for Sunrun shares, which have already risen more than 18% so far this year.
Blum’s outlook remains positive despite policy changes introduced by the Trump administration’s “One Big Beautiful Bill Act” (OBBBA), which reduced tax incentives and policy support for renewable energy and clean infrastructure.
The analyst believes Sunrun’s cash generation prospects have remained strong in the wake of the legislation and continues to regard the company as a leading pick in the residential solar sector.
Breakdown of valuation and long-term cash flow potential
In a note to clients on Wednesday, Blum said Sunrun’s valuation could be considered in two distinct components: a base value reflecting visible cash generation through 2030 secured by “safe harbouring”, and a terminal value capturing longer-term potential that, in his view, is underappreciated by investors.
The base value is supported by Blum’s projection that Sunrun will generate approximately $400 million per year in cash through to 2030.
After that period, additional upside could come from the company’s Battery 48E credit, a federal tax incentive for clean electricity introduced in 2022.
The 48E credit is expected to remain in place until 2032 and then gradually taper off by 2034.
Blum estimates this incentive could provide about $250 million annually in cash generation from 2030 to 2035.
According to the analyst, the OBBBA legislation has effectively secured these 48E credits via safe harbouring, making the forecast more straightforward to model.
“When discounted at a 10% rate with no terminal value, this equates to $8 per share of value, essentially representing the status quo under the current solar regulatory framework,” Blum noted.
He added that clarity on the related Executive Order is still pending, which could have an influence on the long-term modelling.
Additional revenue streams beyond tax credits
Blum also pointed to additional sources of income for Sunrun, including grid services revenue and recurring cash flows, even after federal tax credits expire.
These revenue streams, combined with the projected cash generation from the 48E credit and the secured base value through 2030, support his positive view on the company’s future performance.
Market reaction to the latest analyst update was modest but positive. Sunrun shares rose by more than 1% in premarket trading following the release of Blum’s note.
While the removal of certain incentives under the OBBBA represents a shift in the policy environment for renewable energy firms, Wells Fargo’s analysis suggests that Sunrun’s strategic positioning, combined with its ability to secure long-term incentives and diversify revenue sources, leaves it well placed to deliver continued shareholder value over the coming decade.
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