SUN - SunRun Company Profile

Sunrun Inc. engages in the design, development, installation, sale, ownership, and maintenance of residential solar energy systems in the United States. It also sells solar leads. The company markets and sells its products through direct channels, partner channels, mass media, digital media, canvassing, referral, retail, and field marketing. Sunrun Inc. was founded in 2007 and is headquartered in San Francisco, California. Company description from FinViz.com.

With Tesla closing down 12 Solar City plants and ending the 800-store partnership with Home Depot, Sunrun has become the largest home solar company in the USA. Sunrun has been providing "Solar as a Service" in the U.S. since 2007 and have been doing home installations for more than 20 years. They have outlasted Solar City and a dozen lesser known companies. They are now selling out of Costco stores and other high traffic locations.

Sunrun reported Q1 earnings of 25 cents that beat estimates for 24 cents. Revenue was $144.4 million.

Solar stocks, especially Sunrun are surging since California passed a law requiring most houses built after Jan 1st, 2020 to have solar panels. Cities are seeing sharp increases in electric rates and they are passing them on to their users.

Cities are transitioning to time of day or time of use (TOD/TOU) rates. That means you will pay more for electricity you use during peak periods. In the summer if you crank up the air conditioner during the day you will pay more. If you have electric heating you will pay more in the winter for heating bills. Cities are going to charge based on the amount of electricity they are producing not a flat rate. Some users are seeing their electricity bills spike as much as 400%. One city in Colorado just passed a TOD plan where peak times will be 20 cents per KWH and off peak will decline to 4 cents. That is a tremendous difference. Prior rates were 6-11 cents per KWH. If you use more than 700KWH per month your rate goes up by another 2 cents on a tiered structure per additional KWH used.

Electrical producers have to plan for peak capacity and then be prepared for that capacity even though they may only be running at 60-70% most of the time. That peak capacity is expensive to build and maintain. In the past, they tried to factor it into the base rate but the rapidly rising costs of infrastructure and equipment put many of them into a loss position much of the time. They are going to resolve this with TOD/TOU.

Sunrun does not have leaps so I am using the longest dated option which is March. Shares have spiked since Tesla announced their closure of 12 plants making Sunrun the largest in the USA.

Buy March $18 call at $1.75 each. There is no open interest so use a limit order. Stop loss $12.85.