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SolarCity Will Struggle To Exceed Its “Lofty Expectations”, Say Morgan Stanley Analysts


SolarCity Corp (NASDAQ:SCTY) on Thursday posted a narrower than expected loss for the third-quarter following which Morgan Stanley issued an Equal-weight rating on the firm along with a price target of $92. In the report, Morgan Stanley analyst Timothy Radcliff noted that the company’s struggle to “exceed its “lofty expectations,” may continue.

SolarCity SCTY

Analyst cites competitive headwinds for SolarCity

Morgan Stanley analyst Timothy Radcliff suggested in the report that the company is marching ahead at an impressive pace, booking 230 MW or more than 150% more than third-quarter of 2013. The analyst added that the deployment of 137 MW came in at the low-end of guidance, resulting in a decline in overall 2014 deployments from 525MW to 513MW

Radcliff notes that even though the decline is small and growth appears strong when compared to 2013, “we believe that management may continue struggling to exceed relatively lofty expectations in the coming quarters.”

On the guidance, the analyst believes that it was decent, but not impressive. For the long-term, the company has maintained its all-in-cost goal of achieving $2.50 by 2017, which Radcliff believe “will position the company favorably.”

The report notes that the competitive headwinds are growing for SolarCity, which will moderately impact the market share and the profitability that the company enjoys on each MW developed.

In Radcliff’s base case scenario for SolarCity, “retained value reaches $7.8 billion by YE 2016 and DCF implies $92 per share, assuming 17.5 percent cost of equity and 2 percent terminal growth.”

3Q numbers, 4Q guidance

Shares of the company were down Thursday as investors were not happy with the outlook offered by SolarCity, which was marginally below expectations.

For the latest quarter, SolarCity posted an adjusted loss of 75 cents per share on $58.3 million in revenue compared to analyst’s expectations $1.12 per share loss on $60.2 million in revenue for the third quarter. For the same quarter last year, the solar company posted a loss of 3 cents per share on $48.6 million in revenue.

For the next quarter, SolarCity forecasts a deployment between 179 megawatts and 194 megawatts, which is an increase of 26% sequentially and 81% year over year. For the full year, the company expects deployment of between 502 megawatts and 520 megawatts, representing an increase of 83% year over year from the midpoint.

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