Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Vivint Solar Inc (NYSE:VSLR) dropped 24% today after reporting massive earnings growth. What was the market so upset about?
So what: Vivint Solar reported third quarter revenue jumped 266.4% to $8.3 million and net loss more than quadrupled to $66.7 million, or $0.45 per share on a non-GAAP basis. The bottom-line figure was what investors were fixated on today, and Wall Street had only expected a $0.27 per share loss.
Now what: The real story here is that no one really knew what to expect from Vivint Solar in its first quarter as a public company. It's growing incredibly quickly and spending a lot in operating costs to do so, which is why analysts expected a loss, though they clearly didn't anticipate such a large loss.
But I'll note that solar system installations grew 196% from a year ago to 49 MW and retained value grew 172% to $399 million. Both figures are growing faster than Vivint Solar's main competitor SolarCity, so the company must be doing something right.
I wouldn't be shocked by the loss today and was actually impressed by the $3.12 per watt cost figure Vivint reported, which includes operating costs. That's a competitive cost structure in the solar market and will allow them to continue growing rapidly. I think this is clearly a buying opportunity given the discount shares trade at versus SolarCity and I like the fast growth investors are already seeing in the first quarter the company has been on the market. This will be a volatile ride, but Vivint is becoming a strong player in the residential solar market, and SolarCity better watch out.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends SolarCity. 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.