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SolarCity investors take profits; cash flow goal pushed out

  • Though four firms have hiked their SolarCity (SCTY -7.3%) targets after the company posted mixed Q2 results and reiterated its deployment guidance, investors opted to take profits.
  • One possible concern: CEO Lyndon Rive mentioned on the CC (transcript) SolarCity no longer expects to be cash flow positive for 2014, as it continues ramping investments to grow its customer base.
  • "With Q2 bookings much better than expected, we expect bookings to accelerate into Q3 given the backdrop of a robust US market," says Roth's Philip Shen, hiking his PT by $18 to $98. He's also impressed with SolarCity's realized value and opex per watt, and notes it has set a 2017 installation cost target of $1.90/watt (down from Q2's $2.29/watt).
  • Goldman's Brian Lee (PT hiked by $4 to $96) notes activity outside of the "key states" of California, Hawaii, and Arizona is lifting bookings growth (+216% Y/Y), and expects "the closing of the Silevo acquisition and a potential financing deal for a N.Y.-based manufacturing facility to serve as positive catalysts."
  • Shares still +23% YTD.
Comments (11)
  • cmnsnse
    , contributor
    Comments (614) | Send Message
     
    The whole cash flow equation has changed because they are booking over 200MWs/quarter now. Never did they expect to see such demand this early, so it's now full throttle on developing the capacity to install the expected greater volume coming down the pike in 2016. That's right. Given these new circumstances, Solarcity has the necessary visibility to start hiring and training crews now to start ramping crew deployment in mid 2015 in order to effectively install 2016 capacity. Since they have already achieved the 2015 booking rate, I have a feeling they are going to set a gigantic 1.8GW-2GW for 2016 in the coming months. So have to prepare the "force" for that now.

     

    While investing in the 2016 capacity now, they'll still have hundreds of millions in cash and cash equivalents. ABS is now at $200mln a pop, so I expect at least one more before the end of 2014 to keep cash-flow near break even.

     

    Look at the revenue trend. Lease/ppa have dramatically increased as sales have decreased. Lease/ppa hit the high end of expectations, while sales were near the low end of expectations. Next quarter lease/ppa revenue is expected to be significantly bigger then in company history, where sales are expected to see negative growth. Q2 and Q3 are the transition periods where sales are being weened down to a paltry 12.7% of revenue on the high end. They had more sales from Zep mounting system sales in Q1 then they will have in PV system sales for all of Q3.

     

    With another record breaking 150MWs installed in Q3 added to the 210MWs+ potentially installed in Q4, long term 20 year lease/ppa revenues are sure increase "total" revenue back to record levels.

     

    Again, any increased operational investments made now are NOT being done to achieve the 900MWs-1GW. They already expect to do that. All capacity building investments are aimed at achieving 1.8GW-2GW of installs in 2016.
    8 Aug, 05:28 PM Reply Like
  • TheBanker
    , contributor
    Comments (1343) | Send Message
     
    You're being conservative. The investments they make today are going to help push them to 1M customers sometime in 2018....possibly earlier than expected. It doesn't hurt to stay ahead of the curve even when you're successful. Mike Tyson kept knocking people out in the first round even though he had 9 more to fight. If SCTY wanted profits all they would have to do it back off expenses and purposely slow down growth. Thankfully they are smart enough to keep their foot on the accelerator.

     

    Today's stock action was crazy. The first move was shorts covering and people buying at the market because SCTY was on CNBC last night at least once. We probably picked up some shorts today which is a good thing. We need fresh money to take so we can blow past $88 this month.

     

    Obama is starting a new war in Iraq. I might be exaggerating but he did drop some bombs today. That's not good for momo stocks that are up big on the week considering it is Friday after all. SCTY's stock again is the least predictable on Friday. I keep track of this for my own records. SCTY often moves against the market on Fridays especially when it had a good week to the upside.

     

    SPY is $193 today and SCTY ended $70. I bet SCTY outperforms the SPY 3:1 next week either to the upside or downside. If stocks continue to fall thanks to Russia/Iraq, it won't be pretty for SCTY. If the nonsense ends this weekend, we're going to see a nice pop in both SPY and SCTY next week.

     

    I hope today's fall gave the shorts confidence and the arrogance to short some more.
    8 Aug, 06:59 PM Reply Like
  • cmnsnse
    , contributor
    Comments (614) | Send Message
     
    Banker, if they achieve 2GW by 2016, they will have over 1M customers, 6GWs of installs by summer 2017... a full year ahead of the summer 2018 goal... it will be a total smash...

     

    If they achieve a 2GW goal by 2016, I have a feeling they will raise the 2018 1M customer goal by a significant margin...

     

    As for Iraq, it's a close air support mission for the Iraqi/kurdish forces on the ground. No way we'll ever send significant ground troops in. Not going to start a war. So this is a non starter on the market.

     

    Russia is pulling back. It's volatile, but the whole MH17 situation will give pause, including sanctions, no one wants to prolong any of this(especially the Russians) so it's ultimately about Putin to graceful exit from the situation without feeling threatened or having lost face within Russia. If they continue on the current jagged path to stability, markets will react positively.

     

    Only way Solarcity will ultimately go down, is if they have a material incident/problem stemming from within the company. Even if the market has a major correction, Solarcity will continue to grow big time. Where else will people preserve their capital in a retracting stock market? Bonds? What are the safest bonds? Well, right now Solarcity ABS is swiftly becoming the preservation vehicle de jour...
    8 Aug, 07:43 PM Reply Like
  • TheBanker
    , contributor
    Comments (1343) | Send Message
     
    To be honest I'd love to see them raise profit margins while staying on track to 1M. Literally draw a line on a chart and stick to the line to 1M. If they get ahead of pace then raise margins. Fall behind, cut margins. Everyone expects 1M by the end of 2018 and I don't think that's a goal we should beat. The next best goal is to maintain the "line" and grow margins and cut expenses. We have too many naysayers complaining about EPS. It would be nice to see the .96 EPS loss drop slowly to 0. I don't need a positive EPS but it would be nice to contain the loss to $1 or less. Even a hint of a secondary offering is bad news. There is too much bond money available to even think about a secondary offering.

     

    SCTY will grow regardless of the stock market but we're here to profit from a rising stock price. I don't see Russia/Iraq becoming an issue at all. It was the reasoning behind SCTY's selloff today.
    8 Aug, 07:57 PM Reply Like
  • cmnsnse
    , contributor
    Comments (614) | Send Message
     
    Banker,

     

    Positive institutional activity...
    http://bit.ly/1q1FZ5W
    8 Aug, 08:03 PM Reply Like
  • TheBanker
    , contributor
    Comments (1343) | Send Message
     
    So on a very high volume day (3x normal) institutional traders bought 3x as many shares than sold on a 7% down day. That shows the strong hands were accumulating on a bad day while the weak hands were panicking. Larry Williams would love to trade on this data. He was a big advocate of watching what the smart money is doing vs. the little guy loosing his shirt.

     

    What I'd love to know is out of all the new short interest today, what the quality of those shorters were. If institutions were shorting or just day traders who saw a revenue miss and hopped on board for a nice ride.

     

    Your news is the best news though. Institutions buying 3:1 like that on a down day is great news. It makes me feel better for buying throughout the day. I bought some this morning and then bought more in the afternoon.

     

    I think part of the initial downdraft was traders selling to fill the gap of yesterday at $73. Once the stock hit $73 I bought more and was surprised we made it down to $70.

     

    Technically, I have a line drawn on my chart starting on 7/18 low at $63.50 and another low on 8/4 at $68. Today's low around $69.50 touched that line about bounced to close above $70. Create a 10 min chart on BigCharts.com and you'll see the line I'm talking about. The bounce off the line made me confident we're going to be ok next week assuming the market is steady.
    8 Aug, 08:22 PM Reply Like
  • cmnsnse
    , contributor
    Comments (614) | Send Message
     
    Think next week will be okay too. More news, 239 mutual funds own Scty.

     

    http://bit.ly/1kPRfq8
    8 Aug, 09:05 PM Reply Like
  • rkmatters
    , contributor
    Comments (61) | Send Message
     
    Regardless that there is value here, I think it needs to test $63 support and hold before going higher. New buyers coming in at $70 isn't a steep enough discount. JMHO
    9 Aug, 12:21 PM Reply Like
  • rkmatters
    , contributor
    Comments (61) | Send Message
     
    Regardless that there is value here, I think it needs to test $63 support and hold before going higher. New buyers coming in at $70 isn't a steep enough discount. JMHO
    9 Aug, 12:21 PM Reply Like
  • TheBanker
    , contributor
    Comments (1343) | Send Message
     
    The stock is cheaper today fundamentally that it was at $88 in Feb/March. It's at a hell of a discount already. The $46 low was a panic and it was just at $80 earlier Friday. $70 is fair value no doubt. Asking for another 10% drop is just being greedy.
    9 Aug, 01:25 PM Reply Like
  • GuyWhoReportstoSEC
    , contributor
    Comments (54) | Send Message
     
    This is headed to low $60s, and if any negative news comes, far lower. Whoever is long this stock should truly reconsider. Their projections for Q3 were horrible. The momentum they once had has clearly reversed.
    15 Aug, 04:48 PM Reply Like
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