SolarCity Corp (SCTY) Shares Dive Despite Positive Reports

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SolarCity Corp (NASDAQ:SCTY) stock fell nearly more than 6% on Monday as investors anticipated the market being flooded by shares starting today. The lockup of about 51 million shares of insider-owned stock ends today, meaning insiders who owned shares under that lockup will now be allowed to sell those shares.

Goldman upgraded SolarCity, downgraded First Solar

Last week, Goldman Sachs analysts upgraded SolarCity Corp (NASDAQ:SCTY) to Conviction Buy and raised their price target for the company’s stock from $65 to $80 per share. They compare SolarCity with another player in the solar market: First Solar, Inc. (NASDAQ:FSLR). The Goldman team actually downgraded First Solar from Buy to Sell. So why the difference in these two solar stocks? As it turns out, it’s about their business models.

The analysts believe companies which do rooftop solar installations, like SolarCity, will have the best prospects for growth this year. They think the residential segment of the market is where the growth will especially be focused. The reason they don’t like First Solar as much is because it focuses on utility installations, a segment of the solar industry in which the rate of landing new contracts has gotten slower.

SolarCity dominates in rooftop market

Recent data indicates that SolarCity Corp (NASDAQ:SCTY) held a nearly one-third share of the U.S. residential rooftop installation market at the end of the third quarter of 2013. The company jumped from 26.2% of the market in the second quarter up to 31% in the following quarter. Also the residential PV installation market is clearly booming, as the number of installations rose 49% year over year. Analysts were predicting that by the end of the fourth quarter, that percentage rose to 52%.

According to Seeking Alpha contributor Marsha Robe, penetration of the U.S. electric market is just .1% right now. By 2030, analysts believe that number will rise to 3.5%, meaning there’s not only healthy growth to be had, but also a lengthy span of time during which this growth can and probably will occur.

SolarCity Corp (NASDAQ:SCTY) wants to hit 2.4% of the total addressable market by 2018. Currently it has .2% of the total addressable market.

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