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A Look At Solar City As Shares Soar Over 70%

Chris Lau, KAPITALL Contributor:  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.

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