What happened
The stock of Sunrun (RUN +1.53%) 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.
Image source: Getty Images.
So what
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.
Now what
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.
