Next Monday, SolarCity (SCTY +0.00%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
The solar industry has been hit hard in recent years by overcapacity and a drop in governments' ability around the world to provide subsidies. Yet with an innovative business model, SolarCity is looking to take advantage of solar demand from the ground up. Let's take an early look at what's been happening with SolarCity over the past quarter and what we're likely to see in its quarterly report.
Stats on SolarCity
|
Analyst EPS Estimate |
($0.26) |
|
Year-Ago EPS |
$0.04 |
|
Revenue Estimate |
$29.08 million |
|
Change From Year-Ago Revenue |
17% |
|
Earnings Beat/Miss Last Quarter |
($0.10) |
Source: Yahoo! Finance.
Will SolarCity's earnings shine this quarter?
In recent months, analysts have had mixed views on SolarCity's earnings prospects, narrowing their loss estimates for the first quarter by a penny per share but seeing much worse earnings for the full 2013 and 2014 years. The stock, though, has been on fire, rising 75% since early February.
SolarCity has taken an innovative approach to the solar business. Its focus has been to encourage residential and industrial use of solar systems by offering long-term leases that make them more affordable to homeowners and businesses. As a result, it has been able to take advantage of the low prices on solar panels that have hurt other industry players.
During the past quarter, SolarCity has made huge inroads with a number of big partners. Earlier this week, the company said that it would add a project to provide 6,500 military family homes in Hawaii with solar power, adding to its existing presence at Pearl Harbor as well as in Colorado, New Mexico, Texas, and California. Green-conscious companies have also come on board, with US Bancorp (USB 1.26%) working with the company to install panels over carports at some of its Southern California locations, while Wal-Mart (WMT 1.80%) expects to add 60 SolarCity systems at stores in California as part of its broader initiative to use more renewable energy. As more companies start to look seriously at solar power, SolarCity's model could gain even more popularity.
Perhaps the biggest opportunity for investors in SolarCity is the fact that the shares often trade in lockstep with solar players with much different business models. For instance, earlier this week, First Solar (FSLR +3.09%) reported disappointing earnings, sending the stock lower despite its previous optimistic guidance for the remainder of the year. Yet investors sold off shares of SolarCity as well, despite First Solar's much larger reliance on large-scale solar projects with far different dynamics from SolarCity's typically smaller-scale installations.
In SolarCity's quarterly report, look for more news about how the company plans to bolster its popularity into more partnerships with major corporations. The potential to transform industrial use of electricity is huge, and SolarCity should have plenty of growth opportunities as long as the sun shines.
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