We recently compiled a list of the 7 Best Battery Stocks to Buy According to Analysts. In this article, we will look at where Sunrun Inc. (NASDAQ:RUN) ranks among the best battery stocks to buy according to analysts.

Electric Mobility: A Key Driver of the Battery Industry

The move to electric mobility is a major driver of the battery market globally. Rising gasoline costs and environmental concerns are driving a shift toward electric vehicles. A survey by Carwow found that 44% of drivers changed their driving preferences owing to rising fuel costs. As such, about 14 million new electric automobiles were registered in 2023, showcasing increased demand for EVs, as reported by the International Energy Agency. In the same year, annual electric car sales increased by 3.5 million, representing a 35% uptick year-over-year (YoY). The report also noted that battery electric cars made up 70% of the total electric car inventory in 2023.

Apart from consumer demand, the governments are supporting initiatives to drive growth in electric vehicles and battery markets. In April 2024, British International Investment (BII), the UK’s development finance institution (DFI) agreed to an investment of $19 million in “CHARGE ZONE” of India, which is a rapidly growing EV charging network. As reported in our previous article on the most promising EV stocks to buy, the U.S. Department of Energy announced $1.7 billion in funding to transform 11 struggling auto manufacturing plants into EV production hubs and related products. Thus, governments are clearly striving for a rapid EV transition.

Sector Performance

Despite a promising future, the battery market, especially lithium, is undergoing a tough patch. The oversupply of critical materials including lithium, nickel, and cobalt has shrunk their prices, posing additional challenges for mining and battery companies. As China dominates global production with more integrated production, its utilization of only 40% of its maximum cell output in 2023 resulted in massive over-supply. Therefore, this posed problems for the United States and European countries which strived to localize their supply chains through partnerships.

Therefore, the broader battery market has had a relatively weak performance in 2024, largely driven by A decline in the lithium stocks. Lithium prices saw a downtick of over 80% in 2023, and they reached $12,900 per ton in June 2024 – the lowest in a 35-month period. This is attributed to the oversupply of lithium and the resulting decline in its demand. Furthermore, this is due to a revision in the EV sales growth forecast, particularly as the Chinese market matures and Western demand takes a downward turn. As a result, share prices have also seen a significant decline.

However, the EV revolution continues as BNP Paribas eyes a 23% global sales growth in 2024. Although pure battery EVs’ demand is stagnating, plug-in hybrid EVs are experiencing substantial growth, particularly in China, where hybrid sales grew 90% YoY in April and May 2024, compared to only 10% for battery EVs, according to BNP.

Global Battery Market

While the short-term outlook of the battery market is somewhat uncertain, the long-term outlook is much more promising. The global demand for lithium-ion batteries is expected to surge, driven by electrification and clean energy. The battery demand is projected to grow from 700 GWh in 2022 to 4.7 TWh by 2030.

With the market standing at over $100 billion mark in 2022, it is set to grow at a CAGR of 15.8% by 2030, as reported by Forbes. Apart from consumer demand, regulations like the EU’s internal combustion ban and the U.S. Inflation Reduction Act will also contribute to this growth. Additionally, the emergence of new technologies in the automotive, space, and telecommunication industries that are reliant on solid-state batteries further fuels the growth of batteries.

United States Battery Market

Driven by increased EV sales, the U.S. battery market was valued at $29.44 billion in 2022 and is projected to reach $85.7 billion by 2030. The market is expected to rise at a CAGR of 14.23% during the projected period. This expansion is being spurred by government initiatives that promote renewable energy and innovation. In June 2021, the US announced $200 million in funding for electric vehicles and batteries. Furthermore, Lyten raised $200 million in equity funding to manufacture lightweight batteries and create a manufacturing facility in California, thereby increasing the country’s battery production capacity.

Thus, there’s certainly a promising future for the battery market, and that’s why it is essential we shed light on the Best Battery Stocks to capitalize on its future potential.

Methodology

To curate the list of the 7 Best Battery Stocks to Buy According to Analysts, we screened for companies involved in the battery industry, focusing on areas relevant to battery production and their applications. From that group, we picked stocks with a projected upside potential of over 15% based on analyst price targets. The stocks are ranked according to their upside potential, as of September 22.

We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Sunrun Inc. (NASDAQ:RUN)

Upside Potential: 19.34%

Sunrun Inc. (NASDAQ:RUN) designs, installs, and maintains residential solar energy systems across the United States. The company offers solar panels, battery storage, and related products. It also provides energy solutions for new homes.

Sunrun Inc. (NASDAQ:RUN) demonstrated robust financial performance in Q2 2024. This was primarily driven by the company’s continuous focus on cash generation and its strategic expansion into clean energy solutions. As such, in the quarter, the company reported $217 million in cash, making a significant improvement from the prior quarter. Following this growth and confidence in its operational efficiencies, Sunrun raised cash generation guidance to between $350 million and $600 million for 2025.

The company’s total installed energy capacity reached 192 megawatts during the second quarter. This was mainly attributable to a more selective approach, with a greater focus on high-margin customers amid rising consumer demand. Moreover, it installed 265 megawatts of storage in the second quarter, the highest in the company’s history. Therefore, the battery storage segment of Sunrun Inc. (NASDAQ:RUN) performed exceptionally well during the quarter. Storage attachment rates reached 54% in the quarter, up from 18% in the same period last year. This rapid growth is boosted by the company’s “storage-first” model, with the aim of enhancing customer value and improving margins.

Sunrun now operates 116,000 storage systems in the United States, with a total network capacity of 1.8 gigawatt-hours. This is also the backbone of the company’s virtual power plant (VPP) initiatives. An example of such success is the partnership with Tesla in Texas where customers are compensated for dispatching solar power from their homes.

However, the company anticipates that solar installation volumes will fall to the lower end of its guidance for 2024. Installations are projected to grow by 4%, with a 2% drop in the utility-scale segment and a 19% decline in the residential sector.

Despite the challenges, Sunrun Inc. (NASDAQ:RUN) recently became the first company to register 1 million residential solar customers. The stock has surged 100% in the last 6 months, driven by continued success and growth.

As such, 35 hedge funds have collectively invested $694 million in the company (as of Q2 2024) as per Insider Monkey’s database. Therefore, analysts predict an upside of 19.34% in the share price.

Overall RUN ranks 5th on our list of the best battery stocks to buy according to analysts. While we believe in the potential of RUN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RUN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published on Insider Monkey.