Don’t Get Caught With SolarCity Corp (NASDAQ:SCTY) in Your Portfolio

Solarcity Corp SCTY
Photo Credit: Slim Dandy, Flickr

SolarCity Corp (SCTY) Industrials – Electrical Equipment | Reports August 9, After Market Closes

Key Takeaways

  • The Estimize consensus is calling for a $2.51 loss per share on $137.24 million in revenue, 4 cents lower than Wall Street on the bottom line and $3 million higher on the top
  • SolarCity was recently acquired by Tesla for $2.6 billion in stock, a deal many are labeling as a bailout
  • The company announced they installed 201 megawatts during the second quarter, a significant uptick from expectations and the previous year
  • What are you expecting for SCTY? Get your estimate in here!

SolarCity’s report tomorrow afternoon is likely to be overshadowed by its sale to Tesla. Late last month, Tesla agreed to buy SolarCity in a deal valued at $2.6 billion. The takeover unites two Elon Musk companies that both can’t seem to create any semblance of profit. SolarCity’s business model is struggling as cheap energy shakes up the solar market. The company has relied too heavily on residential projects even though commercial endeavors generate the highest margins. It’s not surprising that expectations are muted this quarter.

The Estimize consensus is looking for a $2.51 loss per share, down 55% compared to the same period last year. That estimate has actually increased 5% since SolarCity’s last report in May. Revenue is anticipated 34% higher to $137.24 million, which would mark the 5th consecutive quarter of double digit gains. Shares of SolarCity are down 53% in the past 12 months and typically don’t improve during earnings season. On average the stock declines 5% through earnings and continues to go down in the following 30 days. SolarCity recently announced that they installed 201 megawatts during the second quarter, significantly higher than expectations of 185 MW. The number is also higher on a year over year basis due to the introduction of a new loan offering which started in the second quarter. But don’t expect this or future quarters to be smooth sailing. The company recently lowered their full year expectations on lower booking in the first and second quarters. SolarCity now expects to install between 900 and 1000 MW of rooftop solar panels, down from its previous guidance in the range of 1000-1100 MW.

Despite some good news this quarter, don’t expect SolarCity to right the ship anytime soon. The company is a cash sinkhole making absolutely no effort to turn a profit. Its sale to Tesla looks like a bailout rather than a mutually beneficial agreement. Investors are accustomed to weak earnings so their attention will be drawn to the conference call. Any indication of how the Tesla takeover will impact future quarters could swing the stock in either direction.
Do you think SCTY can beat estimates? There is still time to get your estimate in here!