Why SolarCity Corp. Shares Will Rise to $75

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of SolarCity Corp.  (NASDAQ: SCTY  ) climbed 4% this morning after Raymond James upgraded the solar energy systems company from market perform to outperform.

So what: Along with the upgrade, analyst Pavel Molchanov planted a price target of $75 on the stock, representing about 23% worth of upside to yesterday's close. So while momentum traders might be turned off by SolarCity's sharp pullback in recent weeks, Molchanov's call could reflect a growing sense on Wall Street that its prospects are becoming too cheap to pass up.

Now what: According to Raymond James, SolarCity's risk/reward trade-off is rather attractive at this point. "SolarCity is executing well, notwithstanding the recent SG&A cost escalation showing the side effects of breakneck growth," said Molchanov. "SolarCity's position as the top non-utility downstream pure-play in the U.S. market is secure, and further market share gains (not assumed in our model) would be an 'icing on the cake' scenario." When you couple that upbeat fundamental outlook with SolarCity's ice-cold stock price, it's tough to disagree with Raymond James' upgrade. 

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Read/Post Comments (9) | Recommend This Article (2)

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  • Report this Comment On March 28, 2014, at 10:03 PM, ronwiserinvestor wrote:

    The solar lease and PPA companies simply cannot compete with the solar system sales companies for two reason.

    First of all solar leases and PPAs are heavily dependent on pricing their systems at a high enough level so that the application of the 30% Federal tax credit yields a sufficient return as promised to their tax equity investors. Dealers that sell systems outright can price their systems as low as they like without any external constraints.

    Second, solar Leases and PPA payments are not tax deductible whereas many $0 down down solar loans do offer tax deductible interest payments.

    These simple two facts makes purchasing a solar system for consumers, a far better investment than renting a system from a solar leasing company.

  • Report this Comment On March 29, 2014, at 4:59 AM, yahoo123 wrote:

    Looks like Ron have bad experience with scty.

  • Report this Comment On March 29, 2014, at 10:27 PM, thaddeus wrote:

    Masters Investor rule No. 1: Don't focus on the profit you could theoretically make but instead on the likelihood that you could lose money by buying at these levels.

    Besides, SCTYs Lyndon Rive has already stated that the first quarter earnings will not be impressive. That bit of news is not priced in at the moment.

  • Report this Comment On March 31, 2014, at 3:31 PM, ronwiserinvestor wrote:

    Here's the reality: SolarWorld's latest trade war complaint has already impacted pricing for the major name brand Chinese manufacturers which have now been forced to raise pricing for the larger solar lease and PPA players.

    Smaller dealers are still able to buy much lower priced (sub 55 cents per watt) non-name brand, but still high quality solar panels which were already in the country prior to the latest price increase.

    These lower priced modules will not help the solar lease and PPA companies because they have large contractual agreement with their established Chinese vendors that they must honor.

    This will make the solar leases and PPA companies even less competitive as we move further into 2014's selling season.

    Couple the much lower cost for these smaller dealer's purchased system pricing with all of the new $0 down loan offerings with tax deductible interest, (remember leases and PPAs don't offer tax deductible interest) and you have the makings of a rapid death spiral for the solar lease and PPA companies.

    Word is spreading fast. Consumers today want much lower (sub $2.90 per watt) system pricing, $0 down solar financing with tax deductible interest, they want to keep the 30% federal tax credit and any cash rebates and they want to own their systems instead of renting from a solar lease company.

    The low hanging fruit (non solar savvy) consumers have been picked. Customer acquisition cost continues to increase. 2014 will spell the end of solar leases and PPA company's domination of the market. System sales (not leases) will "own" the market this year. No pun intended.

  • Report this Comment On March 31, 2014, at 5:12 PM, Neilcichon wrote:

    Ron likely works at a cash-only shop. The data does not support his assertion that PPA/Leases are losing ground. It still has 70% or more of the market.

    Customer aquistion costs are going down in the industry- not up.

    He also claims that smaller dealers can purchase at less than large dealers? Interesting! Apparently the rules of economy of scale and bulk buying are dead! lol

    I'll bet Ron $1,000 that cash does not capture more than 50% of the market in 2014.

    Also, tax equity funds are not that important anymore, or won't be, as securitization takes hold. Tax equity is more costly but the securitization cat is out of the bag. PPA/Lease companies will continue to expand that market.

  • Report this Comment On March 31, 2014, at 8:52 PM, ronwiserinvestor wrote:

    I don't need to capture 50% of the market in 2014 because the thousands of other dealers that offer lower priced, cash and $0 down tax deductible loan deals will easily take the market away from the lease and PPA dealers in 2014.

    And by the way, you're mistaken. The lease and PPA dealers sales are already beginning to slide. Just take a look at S.C.'s latest financials.

  • Report this Comment On March 31, 2014, at 9:48 PM, ronwiserinvestor wrote:

    No Ron does not work at at cash only shop. Ron works at a 16 year old, cash and $0 down solar loan with tax deductible interest shop. (Solar leases and PPAs do not off tax deductible interest).

    Ron also works at a shop that has increasingly been taking sales (even after signing) away from the solar lease and PPA companies for several years. At $2.10 per watt, installed after the tax credit, there's no solar lease or PPA company on the planet that can compete with our pricing.

    And as for your challenge, I won't need to do that because thousands of solar dealers across the country have awakened to the threat that the solar lease and PPA companies have created and they too are educating the public about much lower system purchase pricing and $0 down solar loans.

    Using radio ads , billboards, canvassers, cold calling, direct mailers, the Internet, one by one these dealers will spread the word that leases and PPAs are two of the most expensive ways to finance a solar system. See Solarlease .com to learn why.

    By the end of Summer that message will spread to every corner of the country and the reign of the solar lease and PPA companies will end. Think of it as a death by a thousand cuts.

    The securitization cat may be out of the bag but the sub $2.10 per watt $0 down loan with tax deductible interest dog will eat that cat for lunch. Mark my word.

  • Report this Comment On April 03, 2014, at 3:06 PM, ronwiserinvestor wrote:

    What will all of these pending class action lawsuits against SolarCity mean for SolarCity investors? Just curious?

  • Report this Comment On April 03, 2014, at 4:05 PM, ronwiserinvestor wrote:

    @Neilcichon "Also, tax equity funds are not that important anymore, or won't be, as securitization takes hold" ."the securitization cat is out of the bag".

    4/3/2014 "SolarCity Announces Pricing of Second Securitization". S.C. stock down 5.10% at the close today.

    So much for that pesky securitization cat.

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