Roth Capital Reiterates Buy On SolarCity On The Back Of Loan Offerings
In a research report issued today, Roth Capital analyst Philip Shen reiterated a Buy rating on SolarCity (NASDAQ:SCTY) with a $98 price target, as the company will begin offering loans to homeowners for solar systems.
Shen wrote, “We believe SCTY is reinventing its approach and relationship with its customer by offering a solar loan that could represent as much as 50% of its business by YE’15. Although stock reaction to the news appears mixed, and it may have been weighed down by the overall market, we believe this could be a potential game changer if the loan offering enables RV/W expansion, as it mitigates a number of tail risks.”
The analyst concluded, “Overall, the loan, in our view, mitigates SCTY’s tail risks and may expand its addressable market. Specifically, the loan has no renewal risk, no decommissioning risk, and reduces the overall amount of tax equity required. It may also help with addressing regulatory risk. For example, states such as AZ may force homeowners to pay additional property tax on third party owned systems. Additionally, FMV will be based on actual sales vs. appraised values, resulting in less IRS risk. We note, however, that there could be prepayment risk as customers can prepay the loan at any time. Moreover, SCTY could also enter new markets, such as FL, where third party solar is complicated by laws that prohibit the sale of electricity by any entity other than a utility.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Philip Shen has a total average return of -6.3% and a 23.8% success rate. Shen has a -10.9% average return when recommending SCTY, and is ranked #3223 out of 3319 analysts.