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A Few Reasons Why SolarCity Can Be A Good Investment

August 05, 2014 | About:
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kcpl

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SolarCity (SCTY), a leading clean energy distributor, released impressive quarterly results. The company had been posting continuous losses in the past, but SolarCity came out strongly with impressive results and narrowed its loss. With impressive results, the company seems confident of overcoming challenges and has posted a healthy outlook.

SolarCity is working well to regain its momentum and has succeeded in doing so by narrowing its loss. SolarCity reported a net loss of $24.1 million, which was better than last year’s net loss of $40.9 million. The loss occurred as a result of winter storms in the northeast, which slowed installations.

However, despite a slow start to the new financial year, SolarCity is growing, which is evident from a healthy outlook that it offered for 2014. The company looks set to accomplish the projected 900 MW to 1 GW installations all over the U.S. in both residential and commercial markets by the end of 2015. In addition, SolarCity is making robust moves to tap opportunities for future growth.

Strategic moves reaping results

Taking a closer look, it can be noted that the company is doing well with its strategic moves. SolarCity’s success in attaining efficiency can be noted by the fact that its loss narrowed to 107.69% in a seasonally affected quarter after a successful winter holiday season. Looking ahead, SolarCity is expecting its operating lease revenue to be in the range of $39 million to $43 million while its operating lease margin would be between 50% and 55% of the revenue.

Moving further, SolarCity is focusing on sales and marketing initiatives. It is planning to expand and is determined to deploy over 200 MW until the end of the quarter. The company is confident of benefiting from these pre-bookings. Moreover, SolarCity is also engaged in various initiatives that are expected to profit it in the long run as well. It has exceeded $750 million in financing and has entered into a new $250 million facility by Bank of America/Merrill Lynch.

Increasing contracts

SolarCity is seeing an increase in energy contracts. The company has now a total of 80,000 energy contracts and $2 billion in cash contracts. SolarCity is also trying to maintain a good profit margin. It has undertaken many initiatives to lower the cost of installations such as opening a centralized account management in Las Vegas and opening 10 new operation centers.

The company is also focusing on Nevada and Las Vegas, as these places present favorable opportunities for the company to establish its residential and commercial deployment of MW and deliver better margins. In addition, the company is focusing on achieving operational efficiency, improvisation of processes such as hardware for residential and commercial and offices, and economies of scales such as reduction in the cost of battery.

Technology investments

It can be seen that SolarCity is doing well with its strategies, but the company might face stiff competition from peers such as Real Goods Solar, AEE Solar and Rec Solar, which are also entering the market and are performing well. In response, SolarCity continues to invest in technology and services to create a competitive edge over its peers.

Conclusion

Despite posting a loss in the first quarter, SolarCity looks solid with its impressive advances and strategic moves for the future. The stock can benefit long-term investors due to impressive growth in the solar industry. So, investors should consider this high-growth stock.


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