SolarCity: a Good Bet for Tesla

SolarCity (SCTY) announced first quarter ended March 31, 2016 total revenue of $122.6 million, up 82 percent year-over-year from $67.5 million during the same period last year. Going forward, the company estimates total second quarter of 2016 revenue from the sale of key solar energy components and systems in the range of $14 million to $16 million.

SolarCity declared first quarter of 2016 net operating loss of $283.1 million or $0.25 of diluted loss per share compared to first quarter of 2015 net operating loss of $146.9 million or $0.22 of diluted loss per share.
Moving ahead, the company forecasts second quarter of 2016 adjusted loss per share in the range of $2.70 to $2.80.

The renewable energy generating company reported continued year-over-year top line growth primarily driven by the significant solar power plants installed and deployed successfully during the quarter.

Strong cash flow  

SolarCity has delivered a robust $10 million of consolidated positive cash flows prior to manufacturing-linked investments and strategic investments in module manufacturing is continuing to deliver superior gains with early production well in line to develop greater efficiency modules well within the industry’s average costs. Moreover, SolarCity has uniquely delivered $69 million of recurring cash flows since the previous 12 months that depicts impressive realization of cash flows from key levered projects during each period that records non-recourse debt interest, tax equity distributions, SRECs and customer payments.

The key energy generating company performed certain attractive equity transactions that generate honest cash margins and preserves superior renewal and residual cash flows. Some key equity transactions closed during second quarter of 2016 monetizes $2.36/W of commercial and $3.25/W of residential projects. Further, SolarCity has geographically well-diversified portfolio including, the state mix that comprises of 8% NV, 13% AZ, 34% CA, 38% East Coast and 7% other along with 1.9% of average yearly escalator including SREC value, blended agreement cost of about $0.12/kWh and 1,358 kWh/kW of planned energy harvest.

Importantly, SolarCity has achieved an attractive 6% year-over-year decline in key installation costs to nearly $1.98/W that highlights the company’s superior operational excellence. However, higher sales costs were recorded for the quarter due to weaker volumes that only covered fixed costs.

Impressive points

The impressive cash generating capabilities of SolarCity in addition to attractive cost-optimization efforts collectively are believed to deliver sustainable long-term company growth, allowing it to make future growth investments while delivering attractive shareholder returns.

SolarCity has strategically raised $345 million worth of tax equity leveraging four different growth partners through June and July for financing innovative solar power projects. These strategic financing facilities allows customers to spend lesser for high-cost solar power compared to the payments made for value power arrangements.

Recently, Pacific Gas and Electric Company (PG&E) (PCG) and SolarCity signed a collaboration agreement to develop unique techniques for providing improved gains to the electric grid through joint usage of behind the meter energy storage system and solar smart inverters.

SolarCity seems hugely focused on sustaining a healthy cash position while attractively collaborating with other major energy producing companies to jointly develop and implement advanced but cost-effective solar power solutions while delivering attractive shareholder returns.

The US key solar power generating company has delivered over 40% year-over-year growth in installed MW to approximately 214 MW, delivered 71% year-over-year expansion in deployed MW to about 245 MW and further, delivered $3.46 per Watt of superior MW value delivered under key energy agreements. Also, the company is expected to deliver continued year-over-year growths in residential PV, non-residential PV and utility PV. Moreover, an impressive SREC portfolio is estimated to deliver approximately $122 million of cash flows in the forthcoming 10 years.


Overall, the investors are advised to “Hold” their position in SolarCity Corporation considering the company’s significant long-term growth prospects but currently, weaker financial position with notable total debt of $3.25 billion against smaller total cash position of $361.66 million only. However, the PEG ratio of 0.02 seems misguiding and indicate only weak company growth and profit margin of -13.59% also is disappointing, signifying no profit but loss.
Published on Aug 17, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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