What: It's been a rough couple of months for Sunrun Inc (NASDAQ:RUN) on the public markets. The stock dropped 13% in September and is still well below its $14 per share IPO price.
So what: Solar stocks have fallen along with the broader energy industry in 2015, but there's more to Sunrun's fall. Investors are starting to question the risk residential solar companies present and whether they'll actually be able to generate a return on the projects they build.
SolarCity's recent announcement of a 22% efficient solar panel, which will be in full production in 2017, is also a threat. It's Sunrun's largest competitor and greater efficiency will allow the company to generate more power from each system than Sunrun can.
Now what: There are a number of challenges facing Sunrun and investors aren't giving residential companies the same benefit of the doubt they once did. On top of what I've covered above, the investment tax credit for residential solar systems falls from 30% to 10% in 2017, presenting a big long-term challenge. Given all of the challenges Sunrun faces I don't think the lower stock price is a discount, but rather a bad sign for the future.