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.