Analysts Questioning the Very Existence of SolarCity (NASDAQ:SCTY)
Last week SolarCity Corp. (NASDAQ:SCTY) reported Q-1 adjusted diluted net loss per share of 2.56 on revenues of $122.6-M. In the year-ago Quarter, the company reported a net loss per share of 1.52 on revenues of $67.48-M. The loss was deeper than expected, but what really hammered the stock’s price was the company’s guidance.
The company’s F-Y (full-year) forecast for new installations has dropped from a prior value of 1.25 gigawatts to a new range of 1.00 to 1.10 gigawatts. For Q-2 SolarCity expects to install 185 megawatts, a 2% decline compared with a year ago. The company now expects a net loss of 2.70 – 2.80 per share, way above the consensus estimate for a net loss of 2.13/per share.
The reaction from analysts and investors was fast
The share price dove 25% before recovering to a decliner of around 17%. Last Friday the stock was still down 13%.
Credit Suisse looked at the company’s results and said the weak guidance raised “Existential questions” for the company, meaning the investment bank is beginning to question the actual existence of SolarCity
SolarCity is faced with re-proving the merits of their business model each Quarter, facing either operational, regulatory, capital, or competitive challenges in addition to painfully causing significant ownership rotation. …and the capital challenges facing the company will force investors to re-evaluate the merits, and valuation, of it leadership and business.
While bookings were very soft (down 33% Y-Y), due to regulatory issues among other factors, SCTY noted some improvement. Saying, “We think reaching cost targets and positive cash flow by year-end will be Key. We view SCTY’s business as high risk given its need to continually raise capital.”
I believe SCTY shares are at a crossroad, seeing the flagging potential for spread capture (making money) in the residential solar business, and noting the lengthy capital recycling frames and a challenged ability to forecast.
I see no value in SolarCity. Elon Musk is the company’s largest shareholder.
The 52 wk trading range is 16.81 Vs 63.12
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