Why SolarCity's Stock Jumped Today

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 SolarCity (NASDAQ: SCTY  ) jumped 27% today after the market finally realized what a big deal Goldman Sachs' (NYSE: GS  ) financing package is.

So what: Yesterday, Goldman and SolarCity announced a $500 million financing package that will allow the solar installer to put up 110 MW of projects. This isn't the first financing package for the company, but it's a huge package and having Goldman on the release brings some cache.

Now what: This is really business as usual for SolarCity, so I don't think yesterday's 11% jump, or today's 27% pop, are really justified. The news that Goldman was involved may have brought in some new investors who hadn't considered solar, pushing the stock higher. I think shares have run way too high, and expect a pullback, because the company is still posting losses each quarter. 

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


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  • Report this Comment On May 17, 2013, at 5:26 PM, ifool100 wrote:

    Always enjoy your articles Travis. I think financiers realize the implications of a key event that has occurred. Solar has reached grid parity - sooner than expected. Fossil fuels are getting more expensive. Solar has nowhere to go but cheaper. If you consider the opposite trajectories, the motivations to finance can be compelling. Goldman likes a nice ROI. LIke the rest of us, I really have no idea if SCTY is the "one". But being an innovator they are first in line. Your words say it all: "Business as usual" for SCTY. If this is usual, ha, maybe they do warrant the pops!

  • Report this Comment On May 17, 2013, at 6:08 PM, Terrycau wrote:

    Well, if you read the earnings report the guildance is very good and with this GS news...

    im putting my money on the mgmt after stating the next earnings they will a "Cash Flow Positive"

    and with this GS news i feel this stock has alot of leg room on the upside.

    I do agree with Travis on the shorts ..run for the Cover..instutional investor is coming in hard-

    Dont be "fool" otherwise, they have alot of business coming in and their contract with Wallgreen is growing and they got the contract to install in 10,000 new homes in Long Island NY- so BUY BUY BUY.

    -Tarik

  • Report this Comment On May 18, 2013, at 9:28 AM, PeterS123 wrote:

    I'm surprised that $500M will only install 110 MW. This is $4.50 per installed watt. $4.50/W is not impressive at all, especially given that I would think economies of scale would play here, I guess SolarCity stands to gain a huge profit at that install cost.

  • Report this Comment On May 18, 2013, at 12:21 PM, TMFFlushDraw wrote:

    @PeterS123

    The installed cost for residential and commercial is currently a lot higher than utility scale, which is often well below $3 per watt. If you look at the presentations from SPWR and SCTY over the past week it shows that cost to customer (after ITC, etc.) is about $0.15-$0.18 per kWhr and "retained value", or the present value of future profits, is $1.25 per watt for SCTY and $1.75 for SPWR (based on respective projections).

    http://files.shareholder.com/downloads/SPWR/2406603479x0x664...

    http://files.shareholder.com/downloads/AMDA-14LQRE/248363598...

    Cost will come down but residential and commercial is inherently more expensive than utility projects because you can't generate the same scale. On the flip side, you don't have to build transmission lines to get the power to the customer so there are advantages as well.

    Travis Hoium

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