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Why SolarCity Will Continue Crumbling

Unrealistic targets and debt burden make SolarCity a short

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Feb 17, 2016
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SolarCity (

SCTY, Financial) has failed to deliver many times in the past, and the latest quarter was no different. Although SolarCity surpassed the analysts’ estimates on earnings and revenue, it slashed its forward guidance and missed on the installations target.

To make matters worse, the stock is still bleeding money and has a huge debt load. Investors weren’t pleased with SolarCity’s earnings, and the stock plunged roughly 30% following the earnings report. Despite the drop, SolarCity still has a lot of downside potential and can be shorted at current levels.

Elon Musk failed to keep his promise

SolarCity has failed to deliver on many promises in the past. For instance, let’s consider when the company purchased Silevo. It was presumed to be a huge step forward for SolarCity. The exclusive manufacturing process could manufacture solar cells that were 21% proficient, and estimates were that 24% efficient cells were on the horizon compared to 17% for commodity panels.

In June 2014, Musk said that, within two years, a 1 GW production facility would be completely constructed and running. If everything goes in the right direction as per strategy, there could be numerous GW scale production facilities constructed to feed the company’s rising demand for solar panels. After production delays at the first plant and slowdown in growth plans for the company’s core business, it is not necessary to construct another Gigafactory.

Recently, the company’s management disclosed that building tools for the facility was taking much more time than anticipated. Some tools would not be prepared until the second quarter or third quarter of 2017, making it questionable whether the company will be constructing solar panels at scale until sometime in 2018.

Growing intricacy

Due to the growth of DG technologies, various new energy technologies are being assimilated in the electricity production industry. Although electric services had an inadequate amount of variables to be concerned about before the beginning of cost-effective DG technologies, it clearly indicates that is no longer the circumstance. The simple model of only servicing transmission infrastructures and centralized energy generators will probably turn into a highly unsustainable model.

The electric industry is not prepared for such a drastic industry transformation. As per the new survey from WestMONROE, the majority of utility industry executives, around 59%, reported that they plan to make slight or no DER investments. However, the main reason behind the procrastination is the ambiguous implications of incorporating DERs into their utility business models. It also possibly results from comparatively immobile business cultures.

The major portion of electric utilities does not have enough potential to handle the rising number of variables in the electricity industry, converting them into gradually less striking investment opportunities.


Given how often SolarCity has failed to deliver on its promises, it wouldn’t be surprising if it misses its installation guidance again for the upcoming quarters. For this reason, the stock can continue falling and is a compelling short.

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