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Shares of residential solar installer Sunrun Inc (NASDAQ: RUN) jumped as much as 16.6% today after reporting third-quarter earnings. As of 12:00 p.m. EST, shares were still up 12.9% on the day.
Quarterly revenue jumped 35.6% to $112.0 million, and net income came in at $16.9 million, or $0.16 per share. Better yet, management said 2016 installations would be around 285 MW, above the previous guidance of 270 MW to 280 MW.
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One interesting note is that solar system sales fell from 15% of sales a quarter ago to 10%, opposite of the trends taking place in the industry. And Sunrun continued to have some of the highest costs in the industry, at $3.37 per watt.
Sunrun continues to report strong NPV and installation numbers, but something just doesn't sit well with me. How can a company with the highest costs among large installers be generating more value than competitors installing a similar product?
One figure to watch is the amount of funding that comes from tax equity financing. According to the earnings presentation, $2.33 of project funding is coming from tax equity, which finances the 30% investment tax credit and accelerated depreciation. That's much higher than SolarCity's $1.73 per watt in tax equity financing, indicating that Sunrun is valuing systems at a much higher level than competitors. And that's what's driving cash flow and NPV, which is a red flag for solar investors.
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