As a result of a disappointing earnings release, SolarCity (NASDAQ:SCTY) took a shellacking on Thursday. The stock traded down 17.6% to the low of the day, and closed down 14.4%. Still, the stock is up 6.5% for the month, and the savvy investor would have gained 78% if he or she bought SCTY on the first day of trading in December 2012.
So what happened? Moreover, what is the outlook for this innovative solar company?
It was no surprise that when SolarCity's earnings results were released on March 6, the company had a net loss for 2012 (chart above). Though not as severe as the cash burn in other years since 2009, the company still lost $13.6 million for the year. This gave SolarCity a negative EPS of -0.54, which came in 23% lower than analysts' expectations. These same analysts are seeing negative earnings persist for the at least the next two years.
Not all the news was negative, though. Revenues grew tremendously for this company. Sales were up more than double what they were in 2011, and almost triple that of sales in 2010 (chart above). The number of clients grew even faster, and though revenue per client decreased, the increased volume of clients more than made up for this (chart below). With the attractiveness of distributed solar in the U.S. going forward, and the expertise and desirable financing options SolarCity brings to the table, continued client growth is virtually assured.
What I also find encouraging is that the customer acquisition cost, or the amount of money SolarCity spent to get a new customer, decreased dramatically in 2012. It reached an extreme of about $9,400 spent to obtain each new customer in 2011, but dropped to $1,223 in 2012. Compared with a revenue per customer in 2012 of $4,157, this is a hopeful sign for SolarCity's business plan if these trends continue.
Though I still view SolarCity as an investment for the speculative portion of a portfolio, the long-term prospects for this company look good. It has had two impressive announcements of late - a contract with Wal-Mart to install more than 4.7 megawatts of solar on stores in Ohio, and a high-profile partnership with Honda. Investors that are willing to ride the SCTY stock price rollercoaster are likely to be rewarded handsomely.