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Published on March 11th, 2013 | by Guest Contributor


SolarCity Investment — Good Idea?

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March 11th, 2013 by  

Reposted from the Roen Financial Report:

By Harris Roen

As a result of a disappointing earnings release, SolarCity (SCTY) took a shellacking on Thursday. The stock traded down 17.6% to the low of the day, and closed down 14.4%. Still, the stock is up 6.5% for the month, and the savvy investor would have gained 78% if they bought SCTY on the first day of trading in December 2012.

So what happened? Moreover, what is the outlook for this innovative solar company?

solarcity losses

It was no surprise that when SolarCity’s earnings results were released on March 6, the company had a net loss for 2012 (chart above).

Though not as severe as the cash burn in other years since 2009, the company still lost $13.6 million for the year. This gave SolarCity a negative EPS of -0.54, which came in 23% lower than analysts’ expectations. These same analysts are seeing negative earning persist for the at least the next two years.

solarcity revenue

Not all the news was negative, though. Revenues grew tremendously for this company. Sales were up more than double of what they were in 2011, and almost triple that of sales in 2010 (chart above). The number of clients grew even faster, and though revenue per client decreased, the increased volume of clients more than made up for this (chart below). With the attractiveness of distributed solar in the U.S. going forward, and the expertise and desirable financing options SolarCity brings to the table, continued client growth is virtually assured.

solarcity clients

What I also find encouraging is that the customer acquisition cost, or the amount of money SolarCity spent to get a new customer, decreased dramatically in 2012. It reached an extreme of about $9,400 spent to obtain each new customer in 2011, but dropped to $1,223 in 2012. Compared to a revenue per customer in 2012 of $4,157, this is a hopeful sign for SolarCity’s business plan if these trends continue.

Though I still view SolarCity as an investment for the speculative portion of a portfolio, the long-term prospects for this company look good. It has had two impressive announcements of late – a contract with WalMart to install more than 4.7 megawatts of solar on stores in Ohio, and a high-profile partnership with Honda. Investors that are willing to ride the SCTY stock price rollercoaster are likely to be rewarded handsomely.

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  • science guru

    WOW, I am always amazed by how often this site post something glowing about ‘Solarcity’!
    Are you being paid to advertise for this company?
    When are you going to do an article that shows them to be the con artist they are?
    Why would you rent a solar system for 20 to 30 years, then purchase it at market value and then another 10 years to pay it off? 40 years to own the system?
    If you just purchase a system, it would be paid for in less than 10 years.
    I could become massively wealthy doing the solar leasing thing; but I can do simple math and know it is a SCAM; I would not be able to live with myself!
    It is long past the time to do an accurate comparison of lease vs purchase, including the cost of offset purchase cost after the lease expires!

    • Zachary Shahan

      We receive no money or sponsorship of any sort from SolarCity. It’s a major cleantech corporation — obvious that we’d cover it.

      If you’d like to write up a post comparing a solar lease to a purchase, we’d probably be happy to publish it. Shoot me a note at:

  • Otis11

    To my understanding, SolarCity is a company that does Power Purchasing Agreements correct? This inherently is going to take a huge loss for the instillation of the solar panels and then make money every year after that to make up for it. So unless they are using outside funding which they pay interest on for the vast majority of installations (Which could be possible, I really do not know…?) I don’t actually see a problem…

    • Zachary Shahan

      That’s what I was thinking. But didn’t want to step in with a comment since I’m not deeply knowledgeable about this level of financial matters.

  • Wayne Williamson

    why oh why didn’t they start out in a southern state like florida…

    • Otis11

      While there is significantly better sun in Florida, the lower retail cost of electricity along with the less-favorable state policies make it a hard sell for solar currently. They are better of working in states like California, Arizona, Hawaii, and the North East. I believe even Alaska is a better choice than Florida for those very reasons.

    • Zachary Shahan

      FL has almost no support for solar power, and has relatively cheap electricity. That’s largely why it has a puny amount of solar power per capita:

  • Richard Gere

    To save nature or environment solar power is good option. Therefore investors take initiative this project and invest in it.

    dividend stocks

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