Buy Sunrun shares for a 35% return over the next 12 months: KeyBanc

Sunrun Inc (NASDAQ: RUN) has been a disappointment for its shareholders in recent months but a significant recovery may be in the books over the next twelve months, as per a KeyBanc analyst.

Sunrun shares have upside to $27

On Tuesday, Sophie Karp upgraded the solar stock to “overweight” and said it had upside to $27 – a close to 35% upside from here.

She finds Sunrun shares as attractively valued now that we’re about to see a pause in rate hikes. In her research note, the analyst said:

We acknowledge that [Sunrun] shares have been visibly inexpensive for some time now. However, we’ve seen the worst of tightening cycle, and the sentiment should be bottoming at these levels.

The U.S. Federal Reserve is scheduled for its next meeting in the first week of May.

Sunrun will meet its guidance

Karp is bullish on Sunrun shares also because the alternative energy company has expanded its footprint and is outperforming the industry in California.

The KeyBanc analyst is convinced that the Nasdaq-listed firm will succeed in delivering on its guidance for up to 15% increase in installation capacity this year.

We have a constructive view of RUN’s fundamentals and believe that multiple overhangs created by CA regulatory changes and rate volatility should begin to dissipate in the NT.

Other reasons cited for the constructive view on this solar stock include underappreciated pricing power and potential benefit from the Inflation Reduction Act. Sunrun is expected to lose 11 cents a share this quarter versus 42 cents per share a year ago.

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