Rocketing to a price of $36.63 during today's afternoon trading session, shares of Sunrun are still -22.75% below their average target price of $47.42. Could there be more upside potential for the stock? Analysts are giving RUN an average rating of buy and target prices ranging from $12.74 to $79 dollars per share.
The market, on the other hand, is a bit more pessimistic. Sunrun's short interest -- meaning the percentage of its share float that is being shorted on an expectation of a price decline -- is quite high at 15.6%. The float includes only shares that are available for public trading, and excludes preferred shares.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Sunrun, institutional investors own 95.0% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in RUN, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Analyst coverage, short ratio, and institutional ownership say a lot about how the market views a stock. But markets can be wrong. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about RUN:
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The stock has trailing 12 month price to earnings (Eps) of $-0.69 per share
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Sunrun has a trailing 12 month Price to Earnings (P/E) ratio of -52.8 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 1.2 in contrast to the S&P 500's average ratio of 2.95
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Sunrun is a Technology company, and the sector average P/E and P/B ratios are 20.64 and 5.39 respectively
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