Why SolarCity's Stock Went Dark

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar installer SolarCity (NASDAQ: SCTY  ) dropped 11% today after the company released first-quarter earnings.

So what: Revenue was up 21% from a year ago to $29.99 million, ahead of Wall Street's $29.1 million estimate. The problem is that the company's net loss was $31 million, or $0.41 per share, and analysts were only expecting a $0.32 loss per share.  

Now what: It's going to be some time before SolarCity reports a profit so the higher than expected loss isn't a huge surprise. The company still expects to install 250 MW of solar this year and expects lease revenue to be $16 million-$18 million in the second quarter. This is recurring revenue; it's growth in leases we should be worried about. I don't think this is a reason to panic but I'd be cautious getting into SolarCity because operating expenses are growing much faster than revenue or installations right now.

Interested in more info on SolarCity? Add it to your watchlist by clicking here.

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  • Report this Comment On May 14, 2013, at 4:27 PM, smolloy1010 wrote:

    I agree with the author, why the panic selling today? I think one of the only things that SolarCity has not done a good job on is informing investors (this includes the so called "analysts" is why their EPS is not profitable (yet). Maybe I'm not understanding correctly, but here's the simplified 10 year old child breakdown version.

    They spend money out of their pocket to finance these solar systems. So every time they make a sale they are incurring a large cost upfront. So the goal is to get enough customers that your outlay of cash to purchase and install these solar systems becomes less then your money coming in from the lease agreements. If they went gangbusters and started increasing their sales even more, they would incur a bigger loss because they are spending more money upfront for customer solar systems.

    If you are selling jobs (which they are very well) it is inevitable that one day you will cross that threshold. Then once the systems are paid for, it's big cash flow then.

    Their business model is there, it's only a matter of time.

    $100 a share in less than 24 months is what my crystal ball is showing :)

  • Report this Comment On May 14, 2013, at 8:24 PM, rockstar7x7x wrote:

    well said smolloyy. I agree. classic case of u gotta spend $$ to make $$. and then the $$$ will be steady and a constant cash cow. they are in only 14 states and are only getting started. future valuation does factor in whether its right it wrong and this stock is the mother of all solar installers in the USA and soon international probably.

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