What happened
Shares of Vivint Solar (VSLR) jumped as much as 11.6% in trading yesterday after the residential solar installer reported third-quarter earnings that topped expectations. Shares gave up some of those gains as the day went on, but they closed up 6.8% for the day to lead renewable energy stocks.
So what
Installations jumped to 65.1 megawatts (MW) in the quarter from 54.3 MW a year ago, and revenue jumped 33% to $103.8 million. Net loss increased by 76% to $13.8 million, or $0.11 per share. In the short term, losses can grow when installations rise because of the expenses incurred immediately to capture contracts that generate value for 20 years or more.
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From a value perspective, Vivint Solar is starting to pick up momentum as well. Retained value, a measure of the present value of all future contracted cash flows, increased to $2.19 billion from $1.93 billion a year ago. Management estimates there is $10.32 in net retained value per share. That's not a perfect proxy for how investors should value the company, but if net retained value per share grows over time, which it has from $7.15 two years ago, it makes sense that shares would rise, too.
Now what
The momentum of solar installations is certainly positive, and management said that storage demand is picking up, albeit from a small base, in Hawaii and California. I'm a little concerned about costs per watt rising to $3.48 from $3.16 per watt a year ago, but that's consistent with rising costs across the industry. Given the value Vivint Solar has on the balance sheet, this is a stock I think still has room to run.
