SolarCity Corp (SCTY) Gives Weak Outlook; Industry Still Strong


SolarCity Corp (NASDAQ:SCTY) gave a bleak outlook for the first quarter on late Tuesday while another company in the industry First Solar, Inc. (NASDAQ:FSLR) will be briefing analysts on Wednesday about the challenges that lie ahead. Despite the grim mood among the firms, investors are pretty optimistic over the future of the industry.

IBD’s Energy-Solar group, which is ranked second out of 197 total, has gained 5% this week backed by the impressive fourth quarter earnings from the Chinese solar cell maker JA Solar.

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Impressive revenue, weak outlook

SolarCity Corp (NASDAQ:SCTY), which is chaired by Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk, revealed in the report that it lost 46 cents a share excluding items on revenue of $47.3 million, which increased by 99%. Both revenues and earnings were above the analysts estimates. However, for the first quarter, the solar firm expects a loss of 70 to 80 cents, which is 25 cents higher than the Wall Street forecasts.

CEO Lyndon Rive told analysts, “All our states are doing extremely well and we continue to invest in every state,” and added “California is about half the business, perhaps a bit less.”

SolarCity Corp (NASDAQ:SCTY), which has been closer to being cash flow positive in 2013, now expects to have positive cash flows by this year. This month, the company celebrated its 100,000th customer, and plans for 475 to 525 megawatts of solar installations in 2014

SolarCity creating more value

In after hours of trading, SolarCity Corp (NASDAQ:SCTY) was down 2%, but in the regular session the shares were up 5%. So far this month, shares of the company have been experiencing a decline, but year to date, shares are up 36% compared to 25% gain by the IBD’s solar group.

Roth Capital Partners analyst Philip Shen believes that SolarCity has been reaping gains for working towards more value creation by improving cash flow, increasing asset yields and lowering the financing costs.

Another company in the segment, JA Solar, posted its first profit in 10 quarters on Monday. For the fourth quarter, the company posted a profit of 16 cents a share, which was just a penny more than the analysts’ estimates. The CEO of the company termed China as the “cornerstone” of global solar demand, however, China’s Yingli Green Energy, the biggest supplier of solar modules, was down 8% on Tuesday following weak fourth quarter earnings.