SolarCity Corp (SCTY) Q1 Earnings Preview

SolarCity Corp (SCTY) Q1 Earnings Preview
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity Corp (NASDAQ:SCTY) will release its first quarter results on Wednesday after the market close. For the quarter, installations might face some risk due to weather, but record bookings and better average incremental retained value could push the shares up. That’s according to a report dated May, 4 2014 from Deutsche Bank analysts Vishal Shah, Jerimiah Booream-Phelps and Susie Min.

Analysts expect the company to maintain its 2014 install guidance and provide more details on bookings conversion, developments on the Common Assets funding platform, and more information on ABS deals.

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Record bookings expected in Q1

SolarCity Corp (NASDAQ:SCTY) has provided a guidance of 78 to 82MW deployed, compared to the analysts’ estimate of 80 MW. For the quarter, the analysts at Deutsche Bank forecast operating leases of $27.7 million and system sales of $25 million, compared to guidance of between $27 million and $29 million and $23 million to $27 million, respectively. The analysts expect losses per share of 75 cents on revenues of $52.7 million, against consensus estimates of 74 cents per share in losses and $54 million in revenue. SolarCity has provided guidance of losses between 70 cents and 80 cents per share on revenues of between $50 million and $56 million.

For the second quarter, the analysts also forecast forecast 100 MW deployed and losses per share of 74 cents on revenues of $52.5 against consensus estimate of losses per share of 64 cents and $64 million in revenue.

Analysts believe the solar company will post record bookings for the first quarter, along with improvements in the book-to-burn rate. Adverse weather might have affected expansion into major markets like New York, Massachusetts, New Jersey, Arizona, and Maryland, but in California, expansion has been in line with expectations. Overall, strong bookings progress will compensate for the adverse weather, according to the Deutsche Bank analysts.

SolarCity to maintain cost of capital commitments

Coming to Common Assets, the analysts note that the launch could still be few quarters away; however, a balanced growth in the ABS market would support management to “maintain cost of capital reduction.”

The last announced ABS transaction worth $70 million was less than expected because of the “roll off of cash grant projects,” but analysts believe that, in the coming months, much larger ABS deals in the range of $100 million to $200 million may be announced. Analysts expect SolarCity Corp (NASDAQ:SCTY) to maintain its commitments to reductions in the cost of capital and believe the Common assets rollout to remain in focus “as a potential source of further financing cost reduction.”

A few investors might be worried over the trade case overhang and operating leverage, but the analysts believe that such concerns are already factored in and expect upside from current levels. Deutsche Bank analysts have a Buy rating on SolarCity Corp (NASDAQ:SCTY) with a price target of $90 per share.

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