SolarCity (NASDAQ:SCTY.DL) and SunPower (NASDAQ:SPWR) are putting a lot of effort into growing a residential lease business that will generate cash flow for decades to come. What they're both trying to do is get investors to look at the retained value of its solar installation as a way to value the company. At the end of last quarter, SolarCity's retained value stood at $662 million, $298 million of which is projected to come in 20 years when the lease is renewed.
To grow value for shareholders, SolarCity needs to increase installations and/or increase the value created per watt installed. On the growth side, SolarCity is knocking it out of the park, but its $1.27 per watt in value installed is lower than the $1.75 per watt SunPower projects in California, its largest market.
Joel South sat down with solar analyst Travis Hoium to discuss what retained value is and how investors should look at it going forward.
Fool contributor Travis Hoium manages an account that owns shares of SunPower and personally owns shares and has the following options: long January 2015 $5 calls on SunPower, long January 2015 $7 calls on SunPower, long January 2015 $15 calls on SunPower, long January 2015 $25 calls on SunPower, and long January 2015 $40 calls on SunPower. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.