First Solar, Inc. (FSLR) vs. SolarCity Corp (SCTY): Pros And Cons

First Solar earnings

First Solar, Inc. (NASDAQ:FSLR) and SolarCity Corp (NASDAQ:SCTY) are two stocks that are moving in the opposite direction, despite being from the same industry. However, Daniel Dicker of The Street, prefers the stock that is headed downwards, SolarCity.

First Solar growth questionable

First Solar, Inc. (NASDAQ:FSLR) has been upbeat in the large scale utility installation of solar power, which was up 58% in 2013.  The company has extracted a major portion of its revenue from this segment. Two analysts upgraded the stock for 2014 and 2015, which took the stock even higher on Tuesday.

Growth of large scale solar production is expected to drop as more utilities achieve their set renewable targets. There are some bright spots for these projects in the United Kingdom and Australia, but declining subsidies in Europe, would also be a roadblock for the continued parabolic revenue growth, according to Dicker.

First Solar, Inc. (NASDAQ:FSLR) is planning to break into the segment of industrial rooftop installations, but it would not earn the company very big projects that are vital to the growth of its business model, believes Dicker.

SolarCity a better option

Currently, the solar companies are channeling their resources towards individual homeowner rooftop rather than taking up large scale industry projects. SolarCity Corp (NASDAQ:SCTY) is the undisputed leader in the home segment, with increasing home sales.

Comparing both the stocks is not an easy job because on one hand First Solar is a more traditional looking value opportunity with a forward P/E of 15 and, on the other hand, SolarCity Corp (NASDAQ:SCTY) has a high beta with a very high Price/Earnings multiple.

“Despite all this, I much prefer SolarCity as a way to play the growing solar market here in the U.S,” says Dicker.

First Solar, Inc. (NASDAQ:FSLR)’s Cadmium Telluride technology has some loose corners, according to the Dicker, and opportunities in home rooftop panels are in their early stage where SolarCity is the most dominant player.

SolarCity Corp (NASDAQ:SCTY) and First Solar Inc were two most dominating stock in the Guggenheim Solar index, which surged 120% in 2013. First Solar Inc is different from Solar City in the way that the former deals into utilities and the latter is into residential solar systems.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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