Some 100 gigawatts of solar power projects were completed last year, and after some virus-related issues, there's every reason to expect even faster deployment of solar in the future, explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.
That should help Sunrun (RUN), a provider of residential solar electricity via solar panels and battery storage.
Wall Street jumped on board after the company released some major news: Sunrun announced that it was paying $3.2 billion to take over Vivint Solar, the #2 company in U.S. solar market, which will increase Sunrun’s customer base to 495,000.
In the solar world, residential power is mostly sold door-to-door, but Vivant mitigated the COVID affect by reformatting its sales process with telesales, which cut its cost of acquiring customers and reduced the price of the average system to 22% of its former $18,000 price, to around $4,000.
Those efforts resulted in a sales decline of just 30% in May, much better than the 60% decline that occurred in early COVID days. That strategy fits in well with Sunrun, which had to take its salespeople out of Costco and Home Depot during the shutdown, where those sales accounted for about a third of its revenues.
But the bigger focus is not on the here and now but on what this combination will achieve; the merger will transform Sunrun's business almost completely to a self-installation focus, which keeps costs down, and it should result in $90 million of annual synergies, much of which could be passed on to customers, further bolstering demand. Wall Street clearly likes the idea.
Technically, RUN hit $21 last July, inched out above that level in February (near $24) and then knifed as low as $8 in March. The recovery since then has been strong and persistent, but the acquisition changed everything.
The stock has exploded to new highs on record volume and has continued higher without taking a breath. We don’t advise chasing it here, but we’re also not expecting a huge retreat given the news and power.
