We recently published a list of the 10 Best Small-Cap Stocks to Buy Now. In this article, we are going to take a look at where Sunrun Inc. (NASDAQ:RUN) stands against the other small-cap stocks.
The S&P 500 index has reached its all-time highs, achieving returns of over 20% for the second consecutive year post-COVID. With the index hitting all-time highs, small-cap stocks can be a good option to explore with higher growth potential in the long term.
However, the Russell 2000 small-cap index returned a little over 7% in 2024 compared to the 23% returns by the S&P 500. Over the past five years (through February 25, 2025), the S&P 500 has almost doubled the return of the Russell 2000 small cap, with returns of 102% against 47%, respectively.
Small-Cap Stocks Prospects in 2025
On December 30, MJP Wealth Advisors chief investment officer Brian Vendig appeared on Yahoo! Finance’s Catalysts to address the potential outlook of small-cap stocks in 2025. Vendig said that a stable economy and policy will positively impact the small-caps, creating business expansion and merger opportunities. However, the Trump administration’s harsh tariff policies could impact the broader small-cap stocks as these companies contribute significantly to the U.S. domestic market.
The role of the Fed will also be key in keeping the economy afloat. Vendig said that the market is expected to be choppy in the first few months of 2025. Businesses will start to progress in the second half of 2025 as the policies become clearer. However, Vendig believed that if earnings remain intact, he will likely stay constructive on stocks. He is also bullish on bonds, which might be a good opportunity as well. He said:
“I’m definitely not one to recommend adding to mega-cap tech at this point, but I think taking a look at some of those value-oriented sectors that help to play into innovation and growth for the economy still makes sense.”
With that said, let’s take a look at the Best Small-Cap Stock to Buy Now.
A bird’s eye view of a sprawling solar facility in the Northeastern US, glimmering in the sun.
Our Methodology
We used the Finviz stock screener to compile a list of 30 small-cap stocks. We then selected the top 10 best small-cap stocks based on hedge fund sentiment as of Q4 2024. We have used analyst upside, as of February 27, as a secondary metric to rank the stocks with the same number of hedge fund holders. The list is sorted in ascending order of number of hedge fund holders.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Sunrun Inc. (NASDAQ:RUN)
Analyst Upside: 99.06%
No. of Hedge Fund Holders: 38
Sunrun Inc. (NASDAQ:RUN) is one of the leading residential solar energy providers in the United States that offers solar panels, battery storage, and energy management services. The company is limiting its reliance on fossil fuels by providing homeowners with affordable and sustainable solar energy solutions. The company’s major customer base is residential homeowners seeking renewable energy options and grid independence.
On January 28, Jefferies analyst Julian Dumoulin-Smith downgraded the price target on RUN shares from $19 to $17, keeping a Buy rating on the stock. The analyst expects Sunrun to post a strong outcome in Q4 2024, with effective execution anticipated on cash generation targets. Sunrun seems to be on track to meet its 2025 cash flow objectives despite the recent softness in the residential solar market and growing uncertainties.
Despite the short-term challenges, Sunrun Inc. (NASDAQ:RUN) has nearly doubled its market share in California. The company has made notable developments with attaching battery storage to about 60% of its new projects. The execution of storage solutions has jumped by 126%, expanding Sunrun’s addressable market. The company expects to generate $50 to $125 million in cash in Q4 2024, and $350 to $600 million in 2025. As the company continues to focus on its profitability, it expects to install 320 to 350 megawatt-hours of storage and 240 to 250 megawatts of solar capacity moving forward.
Overall, RUN ranks 3rd on our list of best small-cap stocks to buy now. While we acknowledge the potential of RUN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
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