SolarCity Corp Setting An Unsettling Trend For Investors

SolarCity Corp Setting An Unsettling Trend For Investors
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity reported lower-than-expected earnings for the latest quarter on Tuesday. Though the solar company reported growth in revenues, the results dragged down the entire solar energy industry. The costly customer acquisition and ramp-up of these companies’ operations have left investors impatient, and it showed in their stock prices.

Unsettling trend for SolarCity

It has happened for the third time consecutively that SolarCity’s shares plunged after it released its latest results. This time, it reported a net loss attributable to shareholders of $25 million or 25 cents per share, while for the same quarter last year, it reported a loss of $21.5 million or 22 cents per share.

For the first quarter, the solar power systems provider’s revenues rose 81.6% to $122.6 million. Total operating expenses last year were at $147.4 million, and now, they have increased to $226.9 million. This pushed down SolarCity stock 18% in premarket trading.

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It has become an unsettling trend for SolarCity. The stock declined 35% in February after the company reported its fourth quarter earnings results.

The same is the case for others

SolarCity is not the only company facing these problems. Rivals like Sunrun and Vivint Solar and other players in the residential solar installation industry also saw their share prices decline on Tuesday. Solar stocks have been on a downtrend since late April, and industry followers still have little faith in SolarCity’s pay-now-earn-later business model.

In a note on Monday, Credit Suisse analyst Patrick Jobin said, “SolarCity seems to be faced with re-proving the merits of their business model each quarter – facing either operational, regulatory, capital, or competitive challenges – in addition to painfully, yet gradually, transitioning the strategy more towards value than growth, causing significant ownership rotation.” Adding “This quarter is no different.”

Jobin said he is taking a constructive stance for his outlook, but he did admit that investors will be forced to reevaluate the merits and valuation of SolarCity’s business because of the capital challenges facing the company.

The solar industry is depressed, but despite that, it may present buying opportunities not only in residential solar companies such as SolarCity but also in companies that help service companies like Israeli solar power tech manufacturer SolarEdge Technologies, says The Street.

At 10:14 a.m. Eastern today, SolarCity shares were up 5.16% at $18.71. Year to date, the stock is down by over 63%, while in the last year, it is down by over 69%. The stock has a 52-week high of $63.79 and a 52-week low of $16.31.

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