The SolarCity Machine Is Well In Place To Aggressively Grow, Says Roth Capital


In a research report published August 8, Roth Capital analyst Philip Shen reiterated a Buy rating on SolarCity Corp. (SCTY) and increased his price target to $98 (form $80), on the heels of the release of the company’s strong second-quarter results. According to Shen the key take aways from the quarter are, “(1) SCTY released a 2017 installation cost target of $1.90/W vs. $2.29/W in Q2’14. Impressively, the company has lowered its cost structure by 87c/W down 28% since 2012. The $1.90/W is significant as management believes there will be “thriving ” demand at this cost structure; (2) The company expects securitizations to take place on a quarterly basis to match deployment flow and could see ABS deals remain in the $200mn range with potential for as much as $300mn; and (3) With the stronger growth comes greater WC needs. The company is investing in customer growth and no longer expects to be CF positive in 2014.”

Shen wrote, “With Q2 bookings much better than expected, we expect bookings to accelerate into Q3 given the backdrop of a robust US market. Additionally, RV/W was better than expected at $2/W after adjusting out the impact of LMC II. On an opex/W basis, the company also demonstrated some leverage as opex/W booked improved to 45c/W from Q1 of 60c/W and Q2’13 of 63c/W. All in, we believe SCTY is well on track to hit and likely exceed, in our view, its 2014 guidance midpoint of 525MW. Given the outperformance of bookings and RV/W and the outlook for the rest of 2014, we expect the stock to trade higher on the positive sentiment.” Shen added, “We believe the SCTY machine is well in place to aggressively grow volumes and finance that growth at attractive rates in the back half of 2014 and into 2015.”

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 -2.5% and a 37.8% success rate. Shen has a 17.6% average return when recommending SCTY, and is ranked #2854 out of 3219 analysts.

To read more rating news on SCTY click here.

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