Image source: Getty Images.
SolarCity Corporation (SCTY.DL) has gone through a roller coaster the past three years as investors have fallen in and out of love with solar stocks. Now, the company is in the midst of a buyout offer from Tesla Motors (TSLA -3.40%), which could make for one giant renewable-energy company.
Given the potential risk facing SolarCity today, here are three solar stocks that are in a better position in renewable energy.
Vivint Solar
If you're interested in SolarCity, you should love the value in shares of Vivint Solar (VSLR) right now. Management projects that there is $5.85 per share in net retained value in the business, well above the stock's $3.31-per-share value. But that's not the only place Vivint Solar presents better value than SolarCity.
Below are a few key metrics for both companies, including market cap, MW installed, and cost per watt.
|
Metric |
SolarCity |
Vivint Solar |
|---|---|---|
|
Installation cost per watt (Q2) |
$3.05 |
$2.94 |
|
Market cap |
$2.4 billion |
$357 million |
|
MW installed (Q2) |
201 MW |
61 MW |
Source: SolarCity and Vivint Solar Q2 2016 earnings presentations.
The market cap and installation figures should give you an idea of the difference in scale in the two companies' operations and the difference to their market valuations. Vivint Solar installs just under one-third as many MW of solar as SolarCity, yet its market cap is one-seventh the size.
On top of that, Vivint Solar now has lower costs than SolarCity. That'll make the company highly competitive long-term, and given the low upside for SolarCity investors, Vivint Solar is a better stock.
First Solar
As SolarCity has been building a business built on solar contracts that may show profitability someday, First Solar (FSLR 0.71%) has been building a profitable company in solar. And as a market leader in the utility-scale solar industry, it has a much larger market potential than SolarCty's U.S. rooftop solar business.
SCTY Net Income (TTM) data by YCharts
Another advantage First Solar has is solar technology that's proven in the field and is steadily improving. Investments management has made in improving First Solar's panel efficiency, which helps lower overall installation costs and the amount of power each acre can product.
SolarCity is building a lot of projected value in the solar industry, but First Solar is building real value on its financial statements, which make it a better stock to buy today.
Image source: Tesla Motors.
Tesla Motors
At this point, rather than buy SolarCity, why not just buy Tesla Motors? The upside in SolarCity's shares is all from the buyout offered by Tesla Motors, and if the deal falls through, I think the downside lies with SolarCity.
If the Tesla Motors buyout falls through, SolarCity will have to go with its independent solar business in a market that's quickly moving away from it. Higher-efficiency panels now make more sense for roofs as costs come down, consumers are choosing loans over high-margin leases, and let's not forget the panel manufacturing plant in Buffalo that's already years behind schedule.
There's a lot of risk in SolarCity, and if investors want to bet on the company's upside, Tesla Motors may be the better way to do it.
