Citi upgrades 2 solar stocks as sector defies Trump’s anti-renewable policies because of AI power demand

Citi upgraded solar stocks Nextracker (NXT) and Sunrun (RUN) to "buy" from "neutral," citing increasing AI power demands as a primary catalyst for the sector. The bank raised Nextracker's price target to $114, projecting a 28% upside, based on underappreciated revenue growth potential, a robust $4.5 billion backlog, and anticipated capital returns. Sunrun's price target was increased to $26, indicating a 27% upside, attributed to reduced leverage, lower policy risk, and its dominant 19% U.S. residential solar market share. These upgrades precede upcoming earnings reports and reflect a broader market rebound for solar stocks, with both NXT and RUN having surged over 120% this year.

Analysis

Citi has upgraded Nextracker (NXT) and Sunrun (RUN) from Neutral to Buy, primarily driven by increasing artificial intelligence power demands, which are expected to boost the solar sector. Both stocks have demonstrated significant year-to-date performance, with NXT surging 143% and RUN 122%, contributing to the Invesco Solar ETF's 81.5% rebound since April. These upgrades precede upcoming earnings reports, with NXT scheduled for Thursday and RUN for November 6th.

For Nextracker, Citi analyst Vikram Bagri raised the price target to $114 from $66, indicating a 28% upside, based on underappreciated revenue growth potential and a robust $4.5 billion backlog providing strong medium-term visibility. Key catalysts include the upcoming analyst day on November 12th and the potential for capital returns to shareholders starting next year, which could attract income-oriented investors.

Sunrun's price target was increased to $26 from $11, projecting a 27% gain, attributed to lower leverage and significantly reduced policy risk. The analyst highlighted Sunrun's proactive balance sheet management, including debt reduction, and its dominant position as the largest pure-play residential solar installer with a 19% U.S. market share, which is expected to enhance terms with equipment providers.

Key Decisions for Investors

• Investors should consider initiating or increasing long positions in Nextracker (NXT) and Sunrun (RUN) given the strong analyst upgrades, significant price target increases, and identified fundamental catalysts.
• Monitor closely the upcoming earnings reports for both companies and Nextracker's analyst day on November 12th for further validation of growth trajectories and capital return plans.
• Assess the broader implications of increasing AI power demand as a structural tailwind for the solar sector, potentially supporting sustained growth for well-positioned companies like NXT and RUN.