Will SolarCity Corp’s Massive Spending Be Worth It? (SCTY)
By Mike Herman,
SolarCity Corp (NASDAQ:SCTY) is set to report first quarter earnings at close of the market today, May 5, 2015. In the company’s last earnings report it missed the Wall Street consensus and went into a 17% multi week tailspin before catching a bid. Analyst expectations for Q1 are for a large loss of $(1.58)/share on decreased revenues of $57.7 Million – a 9% decline.
“SolarCity is America’s largest solar power provider. We make clean energy available to homeowners, businesses, schools, non-profits and government organizations at a lower cost than they pay for energy generated by burning fossil fuels like coal, oil and natural gas.”
SolarCity Corp has recently developed two new partnerships since March 2015 with DIRECTV (NASDAQ:DTV) for solar power offerings to existing customers and Tesla Motors Inc (NASDAQ:TSLA) for a solar fueled battery back-up system. A very active and productive quarter as the company strives to expand operations and heighten awareness of the brand.
Monday, Baird Equity Research Analysts downgraded SolarCity Corp to Neutral from Buy and lowered the price target to $65 from &76.
Ben Kallo, a Baird Analyst offered the following, “Although SCTY remains a leader in the U.S. residential market, the company will soon introduce “levered retained value,” which will be optically negative, and we believe the current regulatory environment creates market and headline risk. We believe SCTY likely exceeded its Q1 deployment guidance, although 2015 will be 2H weighted and SCTY’s shifting mix should impact margin over time. We are moving to the sidelines.”
At this time, 15 Wall Street analysts cover SolarCity Corp with 11 buy ratings and 3 sell ratings pegging the average price target at nearly $80 per share. The highest price target comes out of Roth Capital Partners at $98 and the lowest target out of Avondale Partners at $62.
SolarCity Corp continues to burn cash at an exorbitant rate, albeit for business development. Will the return be worth the burn? That question is yet to be answered as SolarCity‘s success is largely dependent on the utility power grid. “IF” SolarCity and the utility companies can interface seamlessly and offer savings to the customers then SolarCity is poised for exponential growth as energy reliance is becoming a more significant issue into the future.