SolarCity’s last earnings report was quite solid as the company beat volume and levered retained value expectations. As a result, the company is one of Goldman Sachs’ top picks in its May 29 Clean Energy Beige Book.
SolarCity posts strong earnings
For the first quarter, SolarCity reported a levered retained value of $1.07 per watt, beating the expectation of 80 cents to 85 cents per watt. The company guided for second quarter installations of 180 watts, which Goldman Sachs analysts suggest could be conservative.
The firm sees SolarCity as being in a great position in terms of the ability to capitalize on the strong rooftop solar growth. Here’s a look at Goldman’s top solar picks:
U.S. solar industry growing rapidly
SolarCity was just one of the solar companies that posted a strong volume beat fir the first quarter. Chief Financial Officer Brad Buss said they’ve been adding “thousands of new customers” and are preparing for a “significant ramp” in the number of deployed megawatts for the second half of this year.
TerraForm also posted a strong volume beat, as did SunEdison and Trina Solar. According to Goldman Sachs’ Solar Beige Book, volume beats were one of the major trends in the solar industry’s first quarter earnings season. One of the reasons for all the volume beats was a reduction in seasonality.
U.S. solar up for the first five months
Wall Street has reacted well to the strong earnings reports in the solar industry, as Goldman’s global Clean Energy coverage group increased 1.1%. The WilderHill New Energy Global Innovation Index grew 1.7%, beating the Russell 2000’s 0.6% growth rate.
The Goldman Sachs team reports that while the U.S. solar segment of the industry declined 1% in the last month, the sub-segment remains up 26% for the full year. (All charts/ graphs in this article are courtesy Goldman Sachs.)
Looking at the top performing Clean Energy stocks over the last month, some notable names include Tesla Motors, which has posted a 7% return for the last month and a 23% return year to date. SunEdison also made the top ten, returning 18% for the month of May and 57% year to date.
Net metering concerns overblown
One of investors’ top concerns regarding SolarCity, SunEdison and other solar stocks is the new net metering policies. Salt River Project recently introduced demand charges, which caused concerns that rooftop solar companies could be affected by lower net metering fees, solar grid access charges or “higher fixed components of the distribution utility charges.”
The Goldman team states that a decline in net metering revenues would probably have the biggest impact. They believe if there’s a shift toward “wholesale” net metered rates, customers would no longer save money on their energy bills by having solar panels installed. However, the analysts also think these concerns are overblown because so far these changes have only impacted Arizona, which represents only a fraction of the total U.S. addressable market.
As of this writing, shares of SolarCity were up 1.61% to $61.09 per share.