Sunrun and SunPower stocks at risk as ESG outflows jump

Sunrun (NASDAQ: RUN) and SunPower (SPWR) stock prices have been in a strong downtrend as concerns about the solar industry continues. The two have crashed by over 40% in the past 12 months and there are concerns that the situation will get worse as interest rates remain higher for longer.

Sunrun vs SunPower stock chart

Is the clean energy bubble bursting?

SunPower and SunRun are some of the biggest players in the solar energy industry in the United States. These companies, together with their peers in the wind industry, are not doing well as interest rates remains high. 

Their collapse has also coincided with a lack of demand for ESG assets. In fact, the most recent data shows that funds that track ESG companies are seeing strong outflows. Net outflows in the US rose to $5.1 billion in the first quarter. A closer look at earnings calls and speeches show that most companies are avoiding talking about ESGs.

There are concerns that the solar energy industry is imploding. Bloomberg recently wrote that the industry in Europe was in a crisis as most solar installers opt for cheap Chinese imports. As a result, several European solar panels manufacturing companies have imploded.

The challenge for Sunrun and SunPower is that the problems that existed in 2023 are not going away. Interest rates are expected to remain at their two decades high for a few months because of the strength of the American economy. Solar demand tends to decline in periods of high rates.

Weak earnings to persist

Sunrun and SunPower will likely continue reporting weak earnings in the coming months. In its most recent quarter, SunPower announced that it will have to restate some of its financial results. It also filed going concern warning, pointing that it is in a rough patch. 

Its adjusted EBITDA came in at minus $1 million as it added just 18,800 new customers during the quarter. It expects that its full-year EBITDA will be between negative $35 million and negative $25 million. The company’s balance sheet was not good with cash bring at just $104 million. This raises the possibility that SunPower will need to raise money soon.

Sunrun is also not doing well. Its quarterly revenue dropped by 10.8% too $563 million. Like SunPower, it also downgraded its forward guidance for the year. It expects to produce between 220 and 245 megawatts of solar capacity, a 2% YoY increase.

Therefore, based on these issues, it is difficult to recommend investing in these solar companies because I believe that the industry will continue seeing more challenges going forward.