Why SolarCity Corp. Is Ready to Rebound

Does this analyst make a good case? Or from is it just more noise Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 17, 2014 at 10:45AM
Energy, Materials, and Utilities

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 (NASDAQ:SCTY.DL) climbed 2% in pre-market trading Thursday after Baird upgraded the solar energy systems company from neutral to outperform.

So what: Along with the upgrade, analyst Ben Kallo planted a price target of $75 on the stock, representing about 34% worth of upside to yesterday's close. So while momentum traders might be turned off by SolarCity's particularly sharp pullback over the past month, Kallo's call could reflect a growing sense on Wall Street that the company's prospects are now too cheap to pass up.

Now what: According to Baird, SolarCity's risk/reward trade-off is particularly attractive at this point. "SCTY's cost reductions and scale continue to strengthen its position in the market," said Kallo. "Additionally, innovative financing products, such as solar ABS', provide relatively low-cost capital for SCTY to capitalize on the expansive U.S. greenfield opportunity." When you couple those seemingly strong tailwinds with its recent price weakness, SolarCity might provide long-term growth investors with a rather intriguing opportunity.