Please ensure Javascript is enabled for purposes of website accessibility

Why SolarCity Corp Popped in April and Dropped in May

By Travis Hoium - May 6, 2016 at 9:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The wild ride for residential solar companies is far from over by the look of it.

Image source: SolarCity. 

What: Shares of Residential solar-power player SolarCity Corp (SCTY.DL) jumped an incredible 23% in April, only to give back those gains and more so far in May. What is going on with SolarCity?

So what: There weren't any huge news items driving SolarCity shares higher; it was more a case of the stock recovering from a huge decline in the past year. The market reacted positively to San Francisco announcing it will require solar on all new construction. But that's probably a short-term bump because it would be a very small incremental boost for a company like SolarCity. 

In May, hedge fund manager Jim Chanos said he was still short the stock, and sees "financial trouble" before the year is out. Chanos has had a long-short position in SolarCity, and he helped put the company's flaws in investors heads last year.

Then the company reported two terrible earnings reports. With first-quarter financials coming on Monday, that may now be in the back on investors' minds. 

Now what: After two bad quarters, there's so much uncertainty for SolarCity, that I want to see how the company is doing before jumping into the stock head first. Nevada's change to net metering caused the company to flee the state in late 2015, which will be a negative, and we may see customers shifting to cash or loan purchases instead of SolarCity's preferred lease or power purchase agreement.

With all of the volatility and uncertainty, I think it would be wise to reassess what direction this company is headed after next week's earnings report.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SolarCity Corporation Stock Quote
SolarCity Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.