Sunrun Posts Mixed Earnings. The Stock Is Plummeting.

The solar energy company is shifting to a more capital-light business model. (David Paul Morris/Bloomberg)

Key Points

• Sunrun’s revenue reached $725 million, a 35% increase year over year, surpassing the $597 million analyst estimate.
• The company reported earnings of 6 cents per share, falling short of the 8 cents Wall Street expected.
• Sunrun’s stock dropped 18% to $16.81.

Shares of Sunrun plunged Friday after the residential solar-energy company beat quarterly revenue estimates but reported weaker-than-expected earnings.

The company posted earnings of 6 cents a share for the quarter, just shy of analysts’ consensus estimate of 8 cents. Revenue totaled $725 million, up 35% from last year and ahead of Wall Street’s call for $597 million.

Sunrun stock dropped 18% to $16.81 on Friday. Shares were up more than 120% this year as of Thursday’s close.

Sunrun primarily makes money by leasing solar panels under fixed or usage-based subscription contracts. Most of the revenue outperformance came because the company is cashing in on the value of new agreements with lessees.

“Sunrun modestly diversified our asset monetization strategy,” Chief Financial Officer Danny Abajian explained on a conference call. “We complemented our strategy of retaining all newly originated subscriber assets on our balance sheet with an alternative structure where we sell a portion of newly originated storage and solar assets to an energy infrastructure investor.”

Sunrun reiterated its full-year guidance for aggregate subscriber value, its term for the expected total value of its relationships with solar-panel customers. The company also narrowed its outlook for cash generation to $250 million to $450 million from a previous range of $200 million to $500 million.

Investors may have hoped for more solar installations. The company installed 239.2 megawatts of solar capacity in the quarter, below analysts’ call for 245.8 megawatts. Subscriber value per customer, meanwhile, declined to $52,446 in the third quarter from $53,891 in the second quarter.

Analysts seemed more positive on the earnings result than investors.

Sunrun is starting to shift to a more capital-light model, said Oppenheimer analysts Noah Kaye and Colin Rusch in a research note Friday. The origination sales in the third quarter are a new wrinkle for the company, allowing it to raise cash while keeping its own high-margin revenue streams. Kaye and Rusch reiterated an Outperform rating and a $23 price target for Sunrun shares.

The company expects both volume growth and margin expansion in 2026, Jeff Osborne of TD Cowen said in a research note. And TD Cowen is “constructive” on contracted subscriber value growth.

The firm reiterated a Buy rating on Sunrun stock and lifted its price target to $23 from $22 “on the sum of the parts” from the quarterly report.

Write to Nate Wolf at nate.wolf@barrons.com