SolarCity Corp (SCTY) Price Target Raised To $50: Baird

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SolarCity Corp (SCTY) Price Target Raised To $50: Baird
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity Corp (NASDAQ:SCTY) shares appear to have stabilized after a rough day yesterday. Meanwhile analysts at Baird remain Neutral on the company in spite of the company’s strong results. They would like to see more details on exactly what management is planning for the upcoming year.

SolarCity Corp (SCTY) Price Target Raised To $50: Baird

SolarCity price target raised

Analysts Ben Kallo and Tyler Frank have increased their price target for SolarCity Corp (NASDAQ:SCTY) to $50 per share. They based their price target for the stock on the net present value of the company’s contracted projects as well as their estimates of projects which will be deployed between next year and 2017.

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The analysts use an 8% discount rate for the company’s initial contracts and an 11% discount rate for renewal contracts for future deployment.

Strong results, but concerns about SolarCity remain

SolarCity Corp (NASDAQ:SCTY) did manage to beat expectations for the third quarter, although Baird analysts continue to focus on deployed megawatts and retained value per watt. The company’s third quarter revenue was $48.6 million, compared to Baird’s estimate of $46.7 million. SolarCity reported losses of 43 cents per share, compared to Baird’s estimate of losses of 47 cents per share. The company installed 78 megawatts during the third quarter and booked 91 megawatts.

One of the concerns raised by Kallo and Frank in their report was tax equity funds. They note that as of Nov. 1, SolarCity had enough tax equity funds for about 149 megawatts of projects. They estimate that this will last into the first quarter of next year, but they believe that it will fall short. Management said it is seeing strong investor demand, but the Baird analysts estimate that SolarCity Corp (NASDAQ:SCTY) will need about $1 billion in tax equity funds to meet its 2014 deployment targets. That’s compared to the approximately $5 billion that’s dedicated to the entire renewable industry every year.

Bright areas in SolarCity’s report

The analysts note that SolarCity is continuing to increase its retained value per watt by reducing costs. It increased to $1.37 during the third quarter, compared to $1.27 in the previous quarter.

They also provided some insight on the company’s planned sale of solar asset-backed securities. Unfortunately, management did not provide enough details on these securities at the time of the investor call, although Baird analysts expect more information will come out after investors purchase some of the securities.

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