SolarCity is set to release its second quarter earnings report on August 9, and the company has already prepared investors for disappointing guidance. Consensus estimates suggest losses of $2.47 per share and $141.57 million in revenue.
Management lowered their full-year guidance for installed megawatts by about 10%. SolarCity and Tesla also announced this week that the former had accepted the latter’s revised lower buyout offer, and as a result, Goldman Sachs analysts raised their price target. Their target increase runs counter to what we’ve seen from many other firms.
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SolarCity price target to $27
In a report dated August 2, analyst Brian Lee raised his target for the solar panel installer to $27 from $23 per share to incorporate a premium for the pending acquisition but maintained his Neutral rating. He also increased the company’s M&A rank to one from three, which means there is a high probability (between 30% and 50%) of it being acquired.
SolarCity preannounced on August 1 that it installed 201 megawatts of solar capacity during the second quarter, which was higher than its outlook for 185 megawatts, but it lowered its full-year guide to between 900 and 1,000 megawatts. The announcement came along with the news that the company had accepted Tesla’s all-stock buyout offer.
Lee believes that loss of market share and lack of a loan product are weighing on SolarCity’s growth expectations, which have slumped to about 10% year over year. The company did announce a new solar plus storage product and another product for new roofs, which it expects to impact the number of megawatts installed next year. Lee believes that the solar plus storage product will help the company hedge against changes in net metering, but overall, he sees it as being uneconomical in most states except Hawaii, at least until the costs associated with the products decline.
Credit Suisse analyst Patrick Jobin also remarked in his August 1 report that SolarCity is losing market share to Sunrun and other competitors. He said data from California Solar Statistics indicates that the company’s share of new residential applications year to date has fallen to 23% from 27% last year.
Is SolarCity the only solar company taking a hit?
Lee also considered whether the trends that have hit SolarCity are specific to the company or whether they are indicative of a broader trend to hit the solar market. He said that data from California indicated that solar volumes overall slowed broadly between May and June, although he adds that share gains at Sunrun have helped to offset this moving through the second quarter reporting season. However, he believes Solaredge will miss estimates.
SolarCity shares edged lower by as much as 0.16% to $24.38 during regular trading hours on Wednesday.