Yesterday, SolarCity Corp (NASDAQ:SCTY) announced it had raised $305 million in cash equity financing. In doing so, the solar panel installer has been able to monetize a portion of future cash flows from a 230 MW portfolio of solar assets. Additionally, the transaction brings into the mix an 18-year loan syndicated to five institutional investors.
Baird analyst Ben Kallo provides his perspective, noting, “Importantly, this is the second time SolarCity has monetized cash flows in recent months and we estimate the company has achieved a lower rate.”
Kallo explains that this “transaction dispels [the] notion that newer installations cannot be monetized. The monetization of assets built in 2015 and 2016 is a positive sign for the company, which faced scrutiny over whether its newer projects could be profitably deployed. We believe the company will continue to make similar cash equity deals to monetize its portfolio of assets.”
The transaction should also serve to bolster shareholder confidence and show that SCTY has better prospects long-term if it can be self-funding.
“While the TSLA transaction still is outstanding, this should help ease TSLA shareholders’ concerns regarding SCTY’s cash needs when/if the transaction closes,” he concludes.
Over time, Kallo anticipates more strategic partnerships to develop, especially as investors “continue to acclimate to renewable energy projects.”
The analyst reiterates a Neutral rating on shares of SCTY with a $25 price target, which represents a nearly 47% upside from where the stock is currently trading.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, two-star analyst Ben Kallo is ranked #2,771 out of 4,163 analysts. Kallo has a 42% success rate and earns 0% in his yearly returns. When recommending SCTY, Kallo loses 12.5% in average profits on the stock.
TipRanks analytics exhibit SCTY as a Hold. Based on 13 analysts polled in the last 3 months, 11 maintain a Hold on SCTY, while 2 issue a Sell. The consensus price target stands at $22.42, marking a 31% upside from where the shares last closed.