The past two months for SolarCity Corp (NASDAQ:SCTY) have been good ones. shares are up 85% since reporting a 4Q miss in March (vs. the Wilderhill Clean Energy Index up 14%) – on decidedly not much in the way of substantive company news. Just in the past week, the stock is up 35% (vs. the Wilderhill Clean Energy Index up 7%)… why? Here is our answer: Elon Musk. He is, of course, the chairman of SolarCity Corp (NASDAQ:SCTY) but much better known as the CEO of Tesla Motors Inc (NASDAQ:TSLA).

Tesla Motors

Tesla Motors Inc (TSLA) Earnings

Tesla Motors Shorts Face “Tsunami Of Hurt” Longboard

While not exactly rational, the epic short squeeze rally in Tesla Motors Inc (NASDAQ:TSLA) shares following its earnings beat last Wednesday has spread into other clean tech stocks – most directly SolarCity but also plenty of others even without the Musk connection, e.g., First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR) (NASDAQ:SPWRB), Enphase Energy Inc (NASDAQ:ENPH), Solazyme Inc (NASDAQ:SZYM), and EnerNOC, Inc. (NASDAQ:ENOC). Keep in mind SolarCity’s short interest as a percentage of float is north of 40%. Mr. Musk clearly has a certain investor aura around him – well deserved, we might add – but as SolarCity’s 1Q results and 2Q guidance show, upside in electric vehicle sales does not equate to better results for solar lease providers.

Following SolarCity Corp (NASDAQ:SCTY) shares’ four-fold surge since the December IPO (vs. the Wilderhill Clean Energy Index up 26% since year-end), calling this stock “overheated” is a bit of understatement.

Analysts at Raymond James believe this quarter was not the blow-out the market was hoping for – no Tesla-like beat, in other words – and, if anything, the timeline to profitability looks even more distant. That said, within the fast-growing U.S. photovoltaic (PV) market, SolarCity is the top (non-utility) downstream pure-play and one of the very few public ones, thereby making it a textbook “story stock.” They maintain a Market Perform rating, albeit with bias to the downside, especially with post-IPO lockup expiration coming up in mid-June.

Morgan Stanley has some bullish comments specifically on Tesla which we cite below.

What Tesla has accomplished isn’t luck, it’s real. Many funds approach an investment opportunity by first asking: does the company do something better or cheaper than anybody else? Tesla Motors Inc (NASDAQ:TSLA) is beginning to convince the market it may do both. Competency in technology is migrating to engineering, manufacturing and marketing. Detroit, Munich, Wolfsburg and Toyota City must feel a sense of astonishment… with a hint of anxiety. 4 things you must know about Tesla:

1. CARBitrage: Tesla Motors Inc (NASDAQ:TSLA)’s innovative ‘capital raising’, funded by its competitors. Selling ZEV credits to other OEMs can fund multiple years of Tesla capex.

2. Lease deal doesn’t just enlarge the addressable market, it multiplies it. We expect Tesla to announce more hiring and investment for 2nd shift to expand Model S capacity by year-end.

3. High share price itself creates value, liquidity. The market’s compression of the company’s risk premium enables Tesla to be opportunistic with tucking-in new equity capital with minimal dilution.

4. Pound for pound the strongest brand in the auto industry? Tesla Motors Inc (NASDAQ:TSLA) is 1/100th the size of BMW, wins Motor Trend car of the year, scores highest ever rating by Consumers Reports. Not a bad start.

4 key drivers of our price target to $103 from $47: We continue to value Tesla Motors Inc (NASDAQ:TSLA) on a 15-year DCF with a 12% WACC but update our assumptions to consider new information. (1) First time inclusion of regulatory credits of >$220m/year, adding $15 per Tesla share. (2) Exit EBITDA multiple up to 9x from 7x to reflect strong launch execution and declining going-concern risk. (3) A 40% increase in our Model S est to 30k by 2015. (4) A 70% increase in Gen 3 volume and other efficiencies.

Further Reading  Elon Musk Might Be A Real Life Tony Stark