The stock of Sunrun (RUN -0.67%) closed the day 9.3% higher on Thursday. This morning, J.P. Morgan made the case that the residential solar installer should be considered as a play on "the de-carbonization, decentralization, and digitization of energy," TheFly.com reports, and it may even be able to parlay its leading position in the market into related solar opportunities, boosting its growth potential.
J.P. Morgan isn't alone in this view. According to Yahoo! Finance data, analysts who follow Sunrun on average expect the stock to grow earnings at a brisk 25% clip (or better) over the next five years. Relative to Sunrun's 29 forward price-to-earnings ratio, J.P. Morgan seems to think this is plenty fast to justify hanging an overweight rating on the stock, and assigning Sunrun shares a $19 price target.
That being said, there are a few things more-conservative investors should consider. For one, the company is only barely profitable right now, with less than $8 million in trailing profit with which to support its nearly $2 billion market capitalization. For another, Sunrun is burning cash at a frenetic pace, with more than $980 million up in smoke over the past 12 months. And with no cash coming in to support its business, Sunrun has had to run up a heaping pile of debt: nearly $2.5 billion at last count, versus just $325 million in cash on hand.
Just because J.P. Morgan likes this stock, doesn't mean you necessarily should.