Capitalize on SolarCity's Rally and Sell the StockSCTY) has been a significant player in the solar sector, and definitely is the America’s largest solar power provider. Throughout the past few years, the company has experienced marvellous growth as it has surged its aggregate client base at a 94 percent compounded yearly rate since the end of 2012.
Despite the increasing customer base, the thing to consider is not only about the company’s performance in expanding and stimulating the solar industry, but the question is if the company is a valuable place to invest in. Growth is prodigious, but lucrative growth is superior, and the research regarding this statement makes that a doubtful call for stockholders.
SolarCity has an appreciable growth story, like many other companies in the solar industry.
Apart from the negative earnings, the company’s balance sheet has endured to decline as time moves on. During the previous five years, SolarCity’s entire liabilities have reached to around $5.7 billion while shares outstanding have surged by more than 20 million, but the free cash flow has gradually dropped.
The company’s short-term as well as long-term debt have gradually surged, currently reaching a level of combined $2.3 billion. Minority interests, deferred revenue, and several other long-term liabilities have also been on a solid rise.
Furthermore, bearing in mind the cash flow breakdown, the losses are hastening as capital expenditures surge and net income drops. So far, SolarCity has been able to cope the cash flow losses by delivering more shares or by including more debt into its account. However, with increasing debt and decreasing share price, these ways for elevating resources may be approaching to an end.
Although I was recently bullish on SolarCity, I think it's time for investors to take their profits off the table. After the recent rally, investors should look to sell the stock as the company's history of making losses, it is not a great long-term investment. There are many better stocks for investors looking to benefit from the solar industry.
Published on Mar 16, 2016By Akshansh Gandhi