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  • Why SolarCity Is Headed Lower 0 comments
    Jul 23, 2014 8:50 AM | about stocks: SCTY

    This week: low $60s
    By ER on 08/04 : mid $50s
    by 2025: $125

    Thesis ***my opinion, trade at your own risk*** :

    1) Purchase of Silevo cost them $200 mil, plus the building project will take 2 years to complete. They do not have adequate cash on hand. In my view, they will need to raise capital by issuing NEW shares. This dilution news, if it comes to fruition, may cause a major sell-off (flush). According to GuruFocus, SCTY had issued over 65 million NEW shares between December of 2012 and December 2013. Sources:

    2) One of the positives claimed in a recent SeekingAlpha article boasted they're hiring additional sales personnel. Hiring sales people is no guarantee new sales will be bolstered enough to pay for the additional expenses. Moreover, even SolarCity's current clients are not all happy. See just some of the complains that made it to Yelp:

    3) Insiders like the CEO, Lyndon Rive (Elon Musk is NOT the CEO) and General Counsel, Seth Weissman, were recently selling their shares.Source: - When insiders sell so close to the ER date, it is usually a negative sign.

    4) They're trading at ~40 X 2013 earnings. That's terrible/lunacy even for a momo name.

    Disclosure: The author is short SCTY.

    Stocks: SCTY
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