SolarCity Corp (NASDAQ:SCTY) shares have declined as much as 27.75% over the last month through Friday. The stock reached its all-time high of $86.14 on February 27, and closed Friday at $61.38. Raymond James analyst Pavel Molchanov said in a research note that this pullback offers an enticing entry point, especially when there is a key near-term catalyst. The research firm has upgraded the stock from Market Perform to Outperform with a price target of $75.
This time SolarCity is likely to offer at least $100 million in notes
It’s the biggest short-term pull-back in SolarCity Corp (NASDAQ:SCTY) stock since August 2013. The stock’s recovery from this correction may not be as fast as last fall’s six weeks. But there is a strong near-term catalyst. SolarCity is executing quite well despite the SG&A cost escalation, which reflects the side effects of skyrocketing growth. The research firm says that the San Mateo-based company’s position as the leading non-utility downstream pure play is secure. Any further market share gains will be “icing on the cake.”
Last November, SolarCity Corp (NASDAQ:SCTY) priced its asset-backed solar bonds. The stock surged more than 11% on the day of the announcement. The next securitization is due in April. Even if the immediate response to the upcoming securitization isn’t as pronounced as the last one, it provides a potentially impactful catalyst. In November, the company had offered $54.4 million in notes due 2026. Markets were impressed by the relatively lower coupon of 4.8%. It represented an opportunity to slash the ‘headline’ cost of capital from the tax equity levels of 8% to 12%. This time, Raymond James expects SolarCity to offer at least $100 million in notes, which should potentially lower the coupon.
SolarCity to benefit from lower module prices
Raymond James forecasts lower per-watt margins through 2018 due to increasing competition in the solar market. But SolarCity Corp (NASDAQ:SCTY) will benefit from lower module prices and declining cost of capital. The benchmark spot module pricing is currently at $0.664 per watt, and has been declining for the eleventh consecutive week. Three months ago, the module prices averaged $0.696 per watt. This price correction isn’t really needle-moving, but it is faster than expected.
SolarCity Corp (NASDAQ:SCTY) shares ticked up 2.12% to $62.68 in pre-market trading Monday.