SolarCity Corporation (SCTY, Financial) designs, installs and sells or leases solar energy systems to residential and commercial customers and government entities in the United States. The company posted narrower-than-expected losses in the third quarter of fiscal 2014, and it turned out to be a record third quarter.
Quarterly results
The loss per share came in at $0.75 per share against consensus estimates of $1.09. On a GAAP basis, adjusted earnings came in at $0.19 per share versus a year-ago loss of $0.03 per share. This was on the back of a year-over-year revenue growth of 20% on the back of a jump in operating leases and solar energy incentives.
During the third quarter of fiscal 2014, the leading U.S. rooftop solar installer booked 230 megawatts, representing a whopping 150% year-over-year growth. In addition, the company also installed 137 megawatts, representing a 77% year-over-year jump and the residential installations also witnessed a 100% year-over-year jump.
New product launches are a catalyst
Moreover, SolarCity launched four new products during the quarter. First is MyPower, which is unique as it pays off the loan with the energy that the system produces. This broadens the offering basket to customers. It launched two new products -- ZS Peak and ZS Beam -- on the mounting hardware side. The former allows for more kilowatt hours per square foot and the latter reduces the cost of installs for carports. Finally, the fourth product was Solar Bonds β an initiative that will allow every American to participate in the energy transformation, while serving as an additional source of capital.
Going forward, the company plans to increase its customer base to 1 million by 2018 fiscal. Currently, the company has 168,000 customers and it needs to grow at 61% a year to hit that mark. Historically, the company has been growing its customer base at a phenomenal rate of 100% year-over-year, so the target of one million is realistic.
SolarCity is also increasing its market share, and its residential division is now larger than the next 50 competitors put together. The company strongly believes that it has cracked the code as far as residential installations are concerned.
More installation ahead
Looking forward, the company is on track to install 179 MW to 187 MW in the fourth quarter, taking the full year installation to be in the range of 505 to 520 megawatts. In fiscal 2015, the company expects to be on track to deploy anywhere between 920 megawatts to a full gigawatt. To meet the demands, SolarCity will be adding 14 new warehouses in the fourth-quarter, thereby covering 95% of the core population within 30 mile radii of its warehouses.
SolarCity is also moving to address the commercial market space aggressively after having established a clear lead in the residential segment. The two new products -- ZS Peak and ZS Beam β are a step in this direction, being innovative restructures for flat roofs. Both these products allow for faster installation times, reduce labor costs and allow for a higher revenue realization per square foot for the client.
The company has been cutting down on cost of installation per KW. The cost has been brought down from $3.03 in the second quarter to $2.90 in the third quarter and expects to hit $2.50 by 2017. Reducing the cost of overheads will increase the profitability going forward. Moreover, with MyPower and Solar Bonds launched as late as October, its impact will only reflect going forward. During the soft launch of Solar Bonds, it received 100,000-page views and bondholders from every state in the country were signed up.
The MyPower product β a program to offer loans to homeowners for solar systems β can drive faster adoption and hence fuel top and bottom line growth for the company going forward, besides redefining the rooftop solar market.
Besides organic growth, the company is also shopping for growth. As a part of this, SolarCity acquired the solar technology and manufacturing company Silevo earlier this year to become a large scale solar panel producer.
Conclusion
Growth in the solar market is a significant opportunity for SolarCity, and the company is trying to make the most of it with its impressive moves. Hence, investors need to consider this growing company for their portfolio.
