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- Elon Musk has had a much more influential role in SolarCity than most people realize.
- The value that Elon Musk brings to SolarCity is not properly reflected in the stock value.
- SolarCity's dominant position will not change anytime soon, especially with a robust management team.
SolarCity: An Estimation Of Intrinsic Value Through Effective Earnings
- The management of SolarCity, the main US solar residential provider, claims retained value of $2.18B as of 3Q14, and the stock valuation has grown 5-fold since its IPO.
- However, questionable assumptions in the calculation of retained value, ever-growing quarterly losses, massive stock dilution and disappointing equity growth have resulted in 36% of the float being short.
- In this article, I show that because opex costs are expensed while revenues are capitalized over 20 years, GAAP figures are misleading.
- On the other hand, management's retained value metric greatly overstates shareholders' value.
- I instead propose a new metric of "effective earnings" and use it to calculate a target price for SolarCity.
- An analysis of solar installations per liabilities assumed is presented.
- SolarCity had a wildly successful Q1 and Q2 2014.
- In Q3, the Gigafactory showed up on the balance sheet.
- Contracted payments continue to outstrip total liabilities.
- More than 17 million shares now short, another new high.
- Over 28% of the float is short, despite a 6% rise in the float.
- Earnings report was mixed. Guidance fairly positive.
- Possibility of a squeeze seems to be increasing.
- Solar parity is a moving target. True parity comes when solar costs less without a subsidy.
- Once solar parity is achieved, demand will start to outstrip supply.
- Play the jockey here, not the horse.
SolarCity's Business Model Will Position It Well For Long-Term Growth
- The company is experiencing a major change in consumer preferences, in terms of its product offerings.
- Distribution revenues are going up, which shows that customers are preferring electricity generated by the company.
- The business model of the company results in higher costs upfront for SolarCity, which results in depressed margins for the company.
- In the long term, the company should have a stable stream of revenues and higher margins.
- Overview of current trends in the American solar PV residential market.
- Why low cost solar, unique financing models, increasing energy rates and improvements in storage technologies are creating the perfect storm for battery based storage systems.
- SolarCity is positioned to capitalize on emerging storage technologies and I explain how it will reap the benefits.
SolarCity: Bright Future Outlook In Light Of Q3 Earnings
- SolarCity has a strong cost discipline that is unrivaled in the industry.
- SolarCity has been consistently meeting or exceeding their growth targets.
- The threat of near-term competition is overstated due to SolarCity's many competitive advantages.
- The future market potential of SolarCity is truly staggering.
What's The Better Play In Solar? Solar City Or Vivint Solar?
- Solar City and Vivint Solar are the two leaders in residential solar.
- Which is a better buy?
- Both companies have high growth and also have high risk.
- When it comes to solar installations, are utilities more profitable or are companies like Solarcity and Vivint more profitable? This article answers the question.
- Utilities have an advantage in that they have far more power sources to choose from.
- Given their options the utilities offer significantly less investment risk.
SolarCity Stands Strong Despite Unrelenting Pressure And Unwarranted Criticism
- SolarCity is a codependent link in the Elon Musk chain.
- SolarCity’s acquisition of Silevo will prove to be very accretive.
- SolarCity’s expense growth is a function of thoughtful planning, not mismanagement.
- Critical characterizations of SolarCity’s financial innovations are misguided.
- SolarCity's massive entry into the solar panel manufacturing space by acquiring Silevo is an incredibly smart move, despite the recent problems plaguing the solar manufacturing industry.
- Management at SolarCity has repeatedly shown to be extremely competent by constantly innovating and staying ahead of the curve, as evidenced by its recent loan and bond program.
- SolarCity's growing reputation and brand as a major solar player will help the company maintain, and even increase, market share.
- This article provides a calculation of Solarcity's value with consideration of projects to date.
- With an understanding of the value of completed projects investors can more clearly forecast future stock price.
- Solarcity's CEO and Directors forecast the company's stock price on a regular basis. They have alarmingly sold $72 million more in shares this year than they have bought.
- 2 months ago Solarcity's CFO, Robert D. Kelly, resigned and this is another red flag.
- SolarCity's new loan product is aimed at bypassing some of the limitations of the lease/PPA products.
- Unfortunately, the product is too convoluted and extends the already bad 20 year contract into a 30 year contract.
- We predict that this new product, along with the existing lease/PPA products, will cause considerable long term harm to customers and stock holders.
- SolarCity (SCTY) books are a mystery, so when will they be clarified?
- Are SCTY's projects profitable? If so, will they be profitable once 30% tax credits disappear?
- The company bleeds money and must borrow heavily, so what is their borrowing rate? Is it low enough, and will it stay low enough?
Wed, May. 7, 5:45 PM
Wed, May. 7, 4:39 PM
- SolarCity (SCTY) now expects to deploy 500MW-550MW of systems in 2014, up from a prior 475MW-525MW. The company is also establishing 2015 deployment guidance of 900MW-1GW (81% growth at the midpoint). Positive cash flow is still expected for 2014.
- 82MW of systems were deployed in Q1, down from Q4's 103MW but at the high end of a guidance range of 78MW-82MW. Deployments are expected to grow to 105MW-110MW in Q2 (+103% Y/Y at the midpoint).
- Q2 EPS is expected to be in a range of -$0.90 to -$1.00 (consensus is at -$0.64). GAAP gross margin is expected to be in a range of 50%-55% (up from Q1's 45%), and GAAP opex is expected to grow to $100M-$110M from Q1's $81.8M.
- 136MW were booked in Q1, +34% Q/Q and well above deployments of 82MW. Cumulative energy contracts +21% Q/Q and +97% Y/Y to 100.6K, cumulative customers +19% Q/Q and +84% Y/Y to 110.7K.
- Q1 results, PR
Wed, May. 7, 4:09 PM
Wed, May. 7, 11:45 AM
- A Q1 beat and full-year guidance hike aren't enough to keep First Solar (FSLR -4.2%) from selling off. Possibly contributing: In spite of the guidance hike, First Solar stated on its CC (transcript) Q2 EPS "will be significantly lower" than a $0.60 consensus due to project timings; that implies 2014 results will be very back-end loaded.
- Also: First Solar disclosed in its earnings slides (.pdf) its expected future systems/3rd-party module revenue is down $400M from the end of 2013 to $7.1B. However, expected module shipments are up by 100MW to 2.8GW, and potential booking opportunities have risen by 1.6GW to 12.2GW.
- Module production totaled 441MW, -1% Q/Q and +19% Y/Y. Conversion efficiency rose 10 bps Q/Q and 60 bps Y/Y to 13.5%, with lead-line efficiency rising 30 bps Q/Q and 120 bps Y/Y to 14.2%. The company is aiming for 18.1%-18.9% lead-line efficiency by 2017.
- Other solar stocks are also off (TAN -2.8%), as investors continue showing a take-no-prisoners attitude towards momentum stocks in general. Canadian Solar (CSIQ +0.3%) has given back the premarket gains it saw following a Q1 guidance hike.
- Notable decliners: SCTY -8.8%. SUNE -7%. TSL -5.5%. CSUN -5.1%. YGE -4.8%. SPWR -4.2%. DQ -5.7%.
Thu, May. 1, 1:15 PM
- SolarCity's (SCTY +3.4%) solar installation/electricity sale service, already available in over a dozen states, has arrived in Nevada.
- The company asserts it can provide electricity to Nevada homeowners who use its panels for as little as $30/month. Installations in the Las Vegas metro area are expected to start in October.
- Shares are rallying on a good day for solar stocks. Q1 results are due on May 7.
Mon, Apr. 28, 2:15 PM
- The latest rout in once-high-flying tech momentum plays isn't leaving solar stocks unscathed. The Guggenheim Solar ETF (TAN -6.2%) is now down 21% from its March 7 high of $51.07.
- Likely adding fuel to the fire: Credit Suisse has slashed its 2014 Chinese solar installation forecast by 500MW to 11.5GW, soundly below the government's 14GW target (set in February). CS thinks policy changes related to utility-scale projects, feed-in tariff reimbursement, and distributed solar incentives are needed for investment to pick up.
- The firm adds JinkoSolar (JKS -10.8%), Trina (TSL -12.2%), and Canadian Solar (CSIQ -12.8%) are well-positioned to profit from downstream projects, given they have access to financing from the China Development Bank and other sources. On the other hand, it thinks Yingli (YGE -4.1%) and ReneSola (SOL -8.8%) are "less likely to access project capital due to their strained balance sheets." Yingli recently priced a stock offering expected to yield $83M in net proceeds.
- Other decliners: FSLR -5.3%. SCTY -7.1%. SUNE -6.8%. CSUN -9.8%. JASO -9.4%. DQ -9.3%. HSOL -5.9%. SPWR -5.1%.
Tue, Apr. 22, 3:56 PM
- Solar stocks are among the biggest winners (TAN +5.2%) on a good day for momentum stocks.
- SunEdison (SUNE +11.6%) is leading the pack after David Einhorn disclosed he has added to the position he started in Q4, and predicted lower solar costs and rising electricity prices should make the company a "winner." Einhorn is less crazy about tech momentum plays in general.
- Meanwhile, Canadian Solar is benefiting from a Japanese module deal, and SunPower (SPWR +6.5%) and SolarCity (SCTY +6.4%) are getting a lift from a Goldman note calling the companies its two best solar ideas. SunPower reports on Thursday.
- Other notable gainers: YGE +7.9%. DQ +9.2%. JKS +7.4%. SOL +6.8%. HSOL +6.7%. ENPH +6.2%. JASO +4.5%.
Thu, Apr. 17, 1:21 PM
- After initially trading near breakeven following a Baird upgrade to Outperform, SolarCity (SCTY +1.7%) has moved higher.
- Baird's Ben Kallo thinks the 35% drop seen since Feb. 27 provides a great buying opportunity for "the stock most levered to the U.S. rooftop market, which will likely undergo a boom over the next several years."
- He also argues SolarCity's cost cuts and scale give it a competitive edge, and that solar asset-backed notes provide it with cheap capital to "capitalize on the expansive U.S. greenfield opportunity."
- Deutsche and Roth talked up the value of SolarCity's asset securitization efforts two weeks ago. Shares rallied yesterday on news of the DOE's loan guarantee proposal.
Wed, Apr. 16, 9:43 AM
- The U.S. Energy Department plans to offer up to $4B in loan guarantees to renewable energy projects, focusing on advanced electric grid technology and storage, biofuels that can be used in conventional vehicles, energy from waste products and energy efficiency improvements.
- Despite the high-profile collapse of Solyndra, the Obama administration believes most of its energy investments have done well, and it credits the program with strengthening the U.S. solar industry.
- Solar stocks: TAN, JASO, SPWR, TSL, FSLR, LDK, CSIQ, YGE, SOL, JKS, CSUN, SCTY, HSOL, EMKR, SUNE, DQ.
- Battery related names: PLUG, BLDP, CBAK, ZBB, ABAT, ULBI, ENS, HPJ.
- EV cars: TSLA.
Fri, Apr. 11, 3:20 PM
- Solar stocks are broadly lower following Yingli Green Energy's (YGE -5.1%) warning of greater than projected declines in PV module shipments in Q1.
- The first solar company to make a Q1 pre-announcement, YGE estimated Q1 shipments fell by the low 30s in percentage points from Q4, below prior company guidance of a mid-20s decrease, due to softness in China and project delays in Algeria.
- YGE reiterated its FY 2014 shipment guidance of 4.0-4.2 GW, and sees higher prices lifting Q1 margins more than expected.
- Although some of YGE's weaknesses may have been company-specific, the warning has cast a shadow over solar stocks today: SUNE -2.4%, FSLR -2.9%, TSL -2.6%, SCTY -1.7%, SPWR -5.2%, JKS -7.6%.
- ETFs: TAN, KWT
Fri, Apr. 4, 10:58 AM
- "We believe investors are largely discounting the potential upside resulting from lower financing costs, grid parity beyond 2016, improving technology/[bill of substance] costs and potential scale benefits driving share gains over time," writes Deutsche's Vishal Shah, reiterating a Buy and $90 PT for SolarCity (SCTY +3.2%).
- Shah considers recent worries about regulation, tougher competition, and weakening profitability overblown, and thinks SolarCity's retained profit/share will continue seeing a 45% CAGR through 2016.
- His note comes after SolarCity priced $70.2M worth of solar asset-backed notes due April 2022 at a fairly low interest rate of 4.59%.
- Roth (Neutral) sees the sale as another positive step towards lowering SolarCity's financing costs. "By varying important variables, such as the advance rate, maturity, and underlying asset profiles, we believe SCTY is attempting to gain an understanding of demand for its ABS product."
- Credit Suisse and BofA/Merrill are also fans; the former now thinks SolarCity has a best-case valuation of $175/share.
Fri, Mar. 28, 10:29 AM
- Raymond James' Pavel Molchanov, who last May called SolarCity's (SCTY +5%) early-2013 rally "bubble-like," has upgraded shares to Outperform.
- Molchanov cites a 30% pullback in shares from their February highs, and fresh solar asset securitization efforts (expected in April).
- Credit Suisse is also out with a bullish note today: The firm calls a new ruling from California's Public Utilities Commission regarding solar net metering (previous) a positive for SolarCity.
- Given SolarCity sells the electricity produced by its installed systems, metering policies/rates can have a big impact on its margins.
Tue, Mar. 25, 9:21 AM
- SolarCity (SCTY) has obtained a new $250M facility via BofA/Merrill to finance over 200MW of solar installations for homes and businesses. The loan is backed by customer receivables; SolarCity expects to refinance it in the securitization market (previous) once installations are done.
- SolarCity says it has now "raised funds sufficient to finance more than $4 billion in solar projects."
- Previous: SolarCity's balance sheet at the end of 2013
Tue, Mar. 18, 4:48 PM
- Thanks to sizable increases in both sales/marketing and G&A spend, SolarCity's (SCTY) opex rose 73% Y/Y in Q4 to $65.2M. $234.9M was spent on investing activities, +64% Y/Y, and operating cash flow fell to $13.9M from $57M.
- $262.4M was raised via financing activities, and $402.7M via equity/convertible note offerings.
- The company expects Q1 GAAP operating lease/solar incentive revenue of $27M-$29M, and solar system sale revenue of $23M-$27M; the Q1 revenue consensus is at $45.2M. EPS is expected to be in a range of -$0.70 to -$0.80, below a -$0.50 consensus.
- SolarCity ended 2013 with $577M in cash/equivalents, $1.68B worth of leased/to be leased solar systems (+71% Y/Y), $246M in long-term debt, $53M worth of solar asset-backed notes, and $230M worth of convertible senior notes.
- Inventories stood at $111.4M, and the deferred revenue balance at $470.1M (up from $379.8M at the end of Q3).
- Shares -1% AH. Q4 results, PR
- Previous: SolarCity's Q4 deployment/booking figures
Tue, Mar. 18, 4:13 PM
Tue, Mar. 18, 2:11 PM| 1 Comment
SCTY vs. ETF Alternatives
SolarCity Corp is engaged in designing, sales, engineering, installation, monitoring, maintenance and financing of solar energy systems to residential and commercial customers, and sale of electricity generated by solar energy systems to customers.
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