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SolarCity: Rapid Growth In Rooftop Installation Makes It A Good Long-Term Investment
- The drop in the prices of PV modules will lead to an increase in the adoption of solar power in the U.S., opening up a big opportunity for SolarCity.
- By offering lease programs and solar bonds, SolarCity is making the right moves to tap this market.
- SolarCity is also looking to tap the commercial market, opening up another growth opportunity.
SolarCity: Market Share Dominance And Entry Into Promising Off-Grid Markets
- SolarCity's market share increased to 39% of the residential solar sector in the third quarter, primarily due to its unrivaled economies of scale, cost-structures and brand recognition.
- SolarCity's involvement in the startup Off-Grid Electric highlights the company's forward-looking nature.
- The off-grid market remains largely untapped and is perfectly suited for SolarCity's distributed model.
- SolarCity's retained value figure remains a heated point of debate.
Utility Rate Changes An Ominous Sign For SolarCity
- We expect utility rate structures to fundamentally break the residential solar lease company business model.
- The risks for SolarCity are outsized and we see mostly negative catalysts going forward.
- We are revising our view of SolarCity from Avoid to Sell.
- SolarCity has agreed to install solar panels on WalMart stores in 36 states in the next four years; this builds on 200 existing solar projects with WalMart since 2010.
- MW deployed and installed rose at a staggering rate, according to recent earnings; the company swung to profitability, as well.
- Analysts from Robert W. Baird, Canaccord, Needham, and Deutsche Bank have all upgraded or initiated coverage on Solar City with Buy/Outperform ratings YTD.
- We see the current dip in stock price, perhaps due to low oil prices, as a buying opportunity for a leading company with a bright future.
SolarCity: Cementing Brand And Presence Through MySolarCity App
- SolarCity's new app reinforces the company's position as an industry innovation leader.
- The MySolarCity app will help SolarCity enter mainstream consciousness.
- MySolarCity not only has practical and social utilities, but also long-term research functionalities.
- Given SolarCity's constant innovations, retained value and massive growth rate, the company's market capitalization is extremely undervalued.
Brad Buss And SolarCity's Promising Prospects After 2017
- Business reliance on tax incentives and lack of transparency are the two main concerns of SolarCity's shareholders.
- Starting in 2017, the incentive tax credit declines to 10%.
- Elon Musk has recently appointed his right-hand man Brad Buss to sort out these issues once and for all.
- We look at SolarCity's profitability after 2017. We implement a scenario analysis and arrive at a promising risk-reward proposition, with an average target price of $97.
- Long-term investors willing to accept substantial degrees of risk should consider taking a position.
Solar Growth Is Just Picking Up - SolarCity Stands To Benefit
- Total solar capacity will double in the next few years.
- SolarCity´s business model provides a visible revenue stream.
- SolarCity will gain a revenue boost from the Wal-Mart deal.
- 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.
Tue, Nov. 18, 11:36 AM
- Under pressure for much of last week, solar stocks are rallying (TAN +4.3%) after SunEdison (SUNE +23.5%) and its TerraForm Power (TERP +29.1%) YieldCo announced they're buying leading wind project developer First Wind for up to $2.4B, and JA Solar (JASO +4%) beat Q3 estimates and upped its full-year cell/module shipment guidance to 3.1GW-3.2GW from 2.9GW-3.1GW.
- Gainers: SCTY +3.9%. SOL +4.5%. TSL +3.7%. YGE +2.7%. JKS +3.4%. HSOL +2.8%. ASTI +6%. DQ +3.2%. RGSE +2.6%.
- SunEdison CEO Ahmad Chatila declares the First Wind deal will double his company's addressable market. Cowen thinks SunEdison "can leverage First Wind’s platform to push into international markets for wind given the potential expiration of the production tax credit for U.S. wind projects."
- Along with its results/guidance, JA announced a $90M buyback; it's good for repurchasing 23% of shares at current levels, if fully used. JA's Q3 gross margin was 15%, -20 bps Q/Q but +370 bps Y/Y. Cell/module shipments rose 15.2% Q/Q and 57% Y/Y to 500.2MW.
Tue, Nov. 11, 12:15 PM
- Newly-public Vivint Solar (VSLR -21.6%) has nosedived after missing Q3 EPS estimates and guiding for Q4 revenue of $5.5M-$6.5M, below a $7.3M consensus. Installations are expected to fall to 45MW-47MW from Q3's 49MW.
- Rivals SolarCity (SCTY -3%) and SunPower (SPWR -3.2%) are following Vivint lower, as are several other solar names. RGSE -6.2%. ENPH -5.7%. CSIQ -2.5%. JKS -2.2%. DQ -4.1%. CSUN -2.7%.
- Solar ETFs: KWT, TAN
Wed, Nov. 5, 4:48 PM
- SolarCity (NASDAQ:SCTY) deployed 137MW of solar systems in Q3, +77% Y/Y but towards the low end of a 135MW-150MW guidance range.
- However, Q4 guidance is for 179MW-194MW of deployments (+81% Y/Y at the midpoint). 2015 deployment guidance has been tweaked to 920MW-1GW from 900MW-1GW.
- SolarCity expects $47M-$52M in Q4 operating lease/systems incentive revenue, and $20M-$24M in system/component sale revenue. Together, that puts revenue above a $66.1M consensus. EPS guidance is at -$1.25 to -$1.35, below a -$1.22 consensus.
- Q3 bookings totaled 230MW, +154% Y/Y. Customers booked rose to 168K from 82K a year ago; however, Q/Q growth slipped to 27K from Q2's 30K. SolarCity is aiming for 1M customers by mid-2018.
- Contracted customer payments rose by $800M Q/Q to $4.1B, and retained value forecast by $400M to $2.2B. Estimated cost per watt fell to $2.90 from Q2's $3.03.
- SolarCity estimates it had a 36% share of U.S. residential solar installations as of Q2, up from a 2013 share of 26%.
- Shares +0.7% AH after initially trading lower.
- Q3 results, shareholder letter (.pdf), presentation (.pdf)
Wed, Nov. 5, 4:12 PM
Tue, Oct. 21, 8:14 AM
Fri, Aug. 8, 4:36 PM
- 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.
Thu, Aug. 7, 5:02 PM
- SolarCity (NASDAQ:SCTY) deployed 107MW of solar systems in Q2, +102% Y/Y and in-line with guidance of 105MW-110MW. 218MW of systems were booked, up sharply from Q1's 136MW. Cumulative deployments are at 756MW.
- Deployments are expected to rise to 135MW-150MW in Q3. 2014 and 2015 deployment guidance is still at 500Mw-550MW and 900MW-1GW.
- Q3 operating lease/incentive revenue is expected to total $50M-$55M (up from Q2's $43.2M), and EPS guidance is at -$1.10 to -$1.20 (below a -$1.00 consensus).
- Cumulative energy contracts +28% Q/Q and +114% Y/Y to 128.9K. Cumulative customers +27% Q/Q and +102% Y/Y to 141K.
- Estimated nominal contracted payments rose by $811M Q/Q to $3.31B. Retained value forecast rose by $513M to $1.8B; that equals $1.72/watt, up from a prior $1.56/watt.
- Thanks to a breakneck construction pace, Q2 net cash flow was -$117.6M. SolarCity ended the quarter with $577.1M in cash, $246M in regular debt, and $230M in convertible notes, and $53M in solar asset-backed notes.
- Shares +0.7% AH. Q2 results, PR.
Thu, Aug. 7, 4:17 PM
Thu, Aug. 7, 10:05 AM
- SunEdison (NYSE:SUNE) recognized revenue from 54MW of solar systems in Q2, below guidance of 60MW-80MW. But it also retained 164MW on its balance sheet, better than guidance of 100MW-120MW.
- The company now expects to finish 1GW-1.15GW of solar systems in 2014, at the high end of prior guidance of 900MW-1.15GW. Revenue is expected to be recognized from 290MW-310MW (down from 460MW-580MW), and 710MW-830MW are expected to be retained (up from 440MW-570MW).
- In addition, SunEdison forecasts average 2014 project pricing of $2.50-$3.00/watt, better than prior guidance of $2.40-$2.75. That's providing a lift to EPS, which beat consensus by $0.40 in Q2.
- Solar project pipeline rose by 700MW Q/Q in Q2 to 4.3GW, and backlog by 100MW to 1.1GW. 475MW of the pipeline is under construction, up from 463MW at the end of Q1 and 200MW a year ago.
- Gross margin was 4.6% vs. 3.8% in Q1 and 5.9% a year ago. An aggressive construction pace led free cash flow to total -$80.2M. SunEdison ended Q2 with $954.7M in cash/equivalents, and $5.39B in debt. ~$3.5B of the debt is directly tied to solar systems financing.
- Peers SunPower (SPWR +4.2%) and SolarCity (SCTY +2.8%) are also rallying. SolarCity reports after the bell.
- Q2 results, PR
Fri, Aug. 1, 12:26 PM
- Solar stocks are underperforming (TAN -4%) amid a market selloff after SunPower (SPWR -8.5%) posted mixed Q2 results and provided Q3/2014 guidance ranges with midpoints below consensus.
- SunPower also announced it's building a new plant (Fab 5) that could go live in 2017 and eventually produce 700MW+/year of modules, boosting its capacity by over 50%. "Our share has been in single digits for a while and demand for the last 24 months suggests that we can expand share," says CEO Tom Werner.
- The announcement comes 6 weeks after SolarCity (SCTY -3.5%) unveiled plans to build a 1GW+ module plant with newly-acquired Silevo's help, and said it will later build "one or more significantly larger plants at an order of magnitude greater annual production capacity."
- Minimal capacity investments, together with rising U.S./Asian demand, have helped module prices stabilize following gut-wrenching declines in prior years.
- Also: SunPower stated on its CC (transcript) it hasn't decided whether to create a solar project YieldCo similar to SunEdison's (SUNE -4.3%) TerraForm Power (TERP -4.7%), which recently turned in a strong IPO. "It does not look like the company is likely to make a decision anytime soon," says Raymond James.
- Nonetheless, Brean has upgraded SunPower to Buy, citing optimism about strong demand and healthy pricing.
- Other notable decliners: FSLR -3.6%. TSL -8.4%. JKS -6%. CSIQ -5.6%. CSUN -5.7%. YGE -5%. SOL -4.5%. ENPH -5.8%. RGSE -4.5%. HSOL -3.9%. JASO -4.4%.
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%.
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
Mon, Mar. 3, 11:51 AM
- After talking with accountant Ernst & Young, SolarCity (SCTY -2.3%) has decided to restate its results from Q1 2012 to Q3 2013 due to "an error in the allocation of overhead expenses." (8-K)
- The company plans to "recognize a downward adjustment of assets related to solar energy systems leased and to be leased and an upward adjustment to the costs of solar energy system sales" for the aforementioned timeframe.
- In addition, SolarCity, which had previously planned to release its full Q4 results today - a business update was provided a week ago - now says it's delaying the filing of its 2013 10-K.
- Deutsche (Buy) thinks "evidence of ineffective internal controls" and the delayed release of Q4 results will worry investors over the near-term. But it also points out there will be "no change in total overhead" in the restatement, only "a shift in how it is allocated."
- The firm adds SolarCity still expects its next offering of solar asset-backed securities to arrive in late Q1 or early Q2.
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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