A Look at Solar City as Shares Soar Over 70%

A Look at Solar City as Shares Soar Over 70%

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To find evidence that there are positive developments in solar energy, look no further than SolarCity (SCTY). The company became public in 2012 at a share price of $8, and closed recently just shy of $20. The company announced that it was added to both the Russell 2000 and 3000 indexes. Per Kapitall, SolarCity engages in the design, installation, and sale or lease of solar energy systems to residential and commercial customers, or sale of electricity generated by solar energy systems to customers.

In Q3/2012, the company deployed 156 megawatts (“MW”) of solar panels. The installation volume increased 117% over the previous year. In Q4 (which was reported on March 6, 2013), deployment dropped to 48MW, but it was still a 129% increase over the previous year. SolarCity lost $1.10 per share, missing estimates by $0.66 per share on revenue that missed by $11 million. The company generated sales of $25.3 million. The company forecasts installations will be 250MW in 2013.

SolarCity forecasts that it will deploy 250MW, consisting of 76MW commercial and 190MW residential. The financing mechanism is a core part of SolarCity’s business, as Forbes magazine details here. By making solar power installation affordable in the United States, the market is expected to grow to $5.7 billion by the year 2016. In 2012, residential solar installations were a $1.3 billion market.

Financing Mechanism

To drive demand, long-term contracts of up to 20 years are signed. Companies like SolarCity also receive support from solar leases. A list of active solar contractors may be found here. In California, the state budgeted $2.2 billion for rebates to drive solar installations. 1,940MW will be installed through to 2016 (the program began in 2007).

Short-Term Negative Cash Flow

Investors interested in SolarCity should expect cash flow to be negative for the next 3 quarters.

Solar Energy Storage and Tesla

Another key part of SolarCity’s business strategy is the development of solar systems for customers. In 2013, its CEO said that the company will finish nearly 100 energy storage systems. The storage will be supplied by Tesla Motors (TSLA). The CEO also thinks that this form of storage will be viable within 10 years.

Chart of Stock Price and Earnings Events

Written by Kapitall contributor Chris Lau

Looking to dig deeper into the solar industry? You’re not alone. Nine out of ten Americans now think it's important for the U.S. to develop and use solar power, while state and local governments are increasingly adopting pro-solar policies. Consider the decreasing panel costs and more efficient technologies and you may agree it's time for investors to seriously consider this space. 

The following infographic produced by Kapitall highlights the current state and potential of the industry. Click to expand the image and learn how to invest in solar or other industries at Kapitall (www.kapitall.com). 

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