Shares of residential solar installer Sunrun Inc (RUN -10.51%) fell as much as 11.1% in trading Thursday after the company reported second-quarter 2019 results. Shares regained some of their losses as the day went on and closed down just 6.2%.
Solar deployed was 103 megawatts (MW), up 13% from a year ago, driving revenue of $204.6 million and a loss of $1.3 million, or $0.01 per share. Analysts were expecting revenue of $198.8 million and a profit of $0.12 per share.
The biggest shock was that creation costs jumped from $3.12 per watt a year ago to $3.33 per watt, which is quickly moving in the wrong direction. What's offsetting that rise in costs is higher project values, which is the sum of the present value of customer payments and investor financing. Even those values should be falling, so there are some troubling trends in Sunrun's underlying business.
Whether or not Sunrun beat or missed earnings estimates, the fact that its costs are rising is a very troubling trend. Sales and marketing costs are now over 50% higher per watt than they were in 2017, and trending higher. At the same time, customers are getting smarter about their energy usage, and competitors are building unique offerings that include loans to own solar assets. Sunrun is operating in a nearly ideal environment with solar installations going up, financing costs going down, and solar costs and technology improving. It should be showing more progress financially than it did today, and that's why its stock is down.