Sunrun and other solar energy stocks have been shining lately
Sunrun Inc (NASDAQ:RUN) is an American provider of residential solar panels and home batteries. Climate bill tailwinds could be imminent, with Senator Joe Manchin's newfound support sending a much-needed jolt to the solar and alternative energy industry. With Sunrun earnings on the dock for Thursday after the close, a deep dive of RUN is warranted to get investors familiar with a stock potentially ripe for a breakout.
Sunrun stock has tumbled in 2022, and earnings in recent quarters haven’t lived up to expectations. RUN is down over 50% from its 52-week high, hitting a low of $16.80 on May 12. However, the equity is up 29% this quarter, and last Friday toppled its 200-day moving average on a closing basis for the first time since November. Sunrun has also been the target of Muddy Waters, short-sellers who claim that the company has poor fundamentals and an intrinsically flawed business model, owing to exaggerated “Subscriber Values”. But with 15% of RUN's total available float sold short, the equity is certainly ripe for a short squeeze.
The company reports earnings after the market closes today. The stock has a mixed history of post-earnings reactions; there's a 6.8% bear gap back in February, but also a 11.9% breakout to the upside in May 2021. Overall, RUN averages a post-earnings move of 6.5% in the last eight quarters, regardless of direction.
Sunrun short-ratio high: The stock may rally if earnings come in stronger than expected
Sunrun's current short ratio stands at 4.18 and the short interest ratio as a percentage of float currently stands at 15%. Short interest has increased over 10% over the past month, indicating that the market expects earnings to be weaker than what analysts forecast. But with the climate spending bill and the general increase in green spending during the year, earnings may yet beat analysts' expectations, which could result in a short squeeze, sending the stock higher. The 30-day open interest for the stock currently stands at 0.7, which indicates the market remains bullish on the stock.
There are a couple of other factors to watch. RUN's 14-Day Relative Strength Index (RSI) of 77 sits firmly in "oversold" territory -- indicating a short-term pullback may be imminent. It's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at a 70 out of 100. This means RUN has exceeded option traders' volatility expectations over the past year -- a good thing for options buyers.
Sunrun’s valuation also remains relatively steady, with price-to-sales at 3.58, which is far more attractive than what it was a while ago. Meanwhile, revenue is expected to grow by 25% during the fiscal year. Earnings for the stock should be interesting, and investors will be looking at what management has to say about Sunrun's outlook.