SolarCity Corp (NASDAQ:SCTY) and First Solar, Inc. (NASDAQ:FSLR) were among the leaders in the Guggenheim Solar index, which gained 120% in 2013. Solar stocks are still hot, but not all solar companies are the same. So how does an investor choose which one to invest in? InvestorPlace contributor Aaron Levitt considers the merits of both SolarCIty and First Solar and their stocks. Both companies had spectacular returns last year, and more could be on the way this year.

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First Solar reigns supreme in utilities

Of course the big difference between First Solar, Inc. (NASDAQ:FSLR) and SolarCity Corp (NASDAQ:SCTY) is that the former is focused on utilities, while the latter is focused on residential solar systems. Numerous analysts have pointed that out. First Solar, Inc. (NASDAQ:FSLR) decided to shift toward the utilities market because management reacted to the glut of inexpensive solar panels coming from Chinese solar companies. At this point, First Solar is now a vertically integrated business.

More than 85% of First Solar, Inc. (NASDAQ:FSLR)’s business comes from its utility scale systems business accounts. All throughout last, year the company increased its sales to energy suppliers like PG&E Corporation (NYSE:PCG), and those sales drove its financial performance.

First Solar disappoints on utility plan

Unfortunately though, this shift toward the utilities business may not end up being as profitable as it was for the company last year. First Solar, Inc. (NASDAQ:FSLR)’s latest earnings report was pretty disappointing, as it posted a 29% year over year decline in fourth quarter revenues, which fell to $768 million. The reason for this is because utilities in the U.S. have greatly slowed down the speed at which they’re entering into new contracts. Agreements for power plants which are 200 megawatts or larger have slowed the most.

Levitt believes that First Solar, Inc. (NASDAQ:FSLR) will be able to return to growth again in the long-term as the company moves into international markets and captures utility contracts in other parts of th globe. First Solar has been pushing into China and Japan, both of which have rapidly growing solar markets right now. He believes that this will return the company to profitability and bring its revenues back up to where they were before.

SolarCity rules in consumer solar

SolarCity Corp (NASDAQ:SCTY)’s business model is focused on installing consumer solar systems and leasing them to businesses and homeowners at a monthly fee. The company more than doubled the number of installed panels during the fourth quarter of the year, hitting a record 103 megawatts, which brings its number of contracts up to almost 80,000. SolarCity guided for installation of approximately 82 megawatts of panels for this quarter and 525 megawatts for the full year.

The problem many have mentioned—and Levitt is no different—is that SolarCity Corp (NASDAQ:SCTY) focuses more on the financing and leasing rather than the solar systems themselves. In fact, he says it acts “more like a bank rather than a traditional homebuilder or contractor,” noting that the company uses a number of asset-backed securities, tax credits, subsidies and debt to create the leases and then generate income and profits.

SolarCity delays earnings report

Investors were none too thrilled at first when SolarCity Corp (NASDAQ:SCTY) announced that it had to delay its earnings report again because it needed to reallocate costs from a number of acquisitions using GAAP rules. Investors never like to hear about accounting problems, although this time around, they don’t seem just too worried about it.

Looking for a trade or an investment?

Levitt sees First Solar, Inc. (NASDAQ:FSLR) and SolarCity Corp (NASDAQ:SCTY) in two different lights, so he basically says that it depends on what investors are looking for. He sees First Solar as being a better long-term investment option because it focuses on utility installations in markets around the globe. He also sees it as being more stable because he says big utility companies don’t “fork over hundreds of millions of dollars without making sure a project’s cash flows will be adequate over several years.”

He thinks investors who are looking for a trade, however, might be more interested in SolarCity Corp (NASDAQ:SCTY). He notes that California has turned into a particularly lucrative market for consumer solar installations, although the reliance on subsidies can be a problem for a renewable energy company in the long term. It’s possible California might stop handing out those subsidies because it needs to trim the budget. And then there are concerns about the housing market because if it goes down, SolarCity’s business will likely be affected as well.

Nonetheless, SolarCity Corp (NASDAQ:SCTY) remains a momentum stock that’s going strong, at least for now, but he believes that will change. Shares declined nearly 3% today, continuing the downward trend which began on Tuesday.