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SolarCity Corp (SCTY)'s Recent Dip An Enticing Entry Point

Stocks in this article: SCTY

Raymond James: "SolarCity's position as the leading non-utility downstream pure play is secure. Any further market share gains will be icing on the cake"


SolarCity Corp (SCTY) shares have declined as much as 27.75% over the last month through Friday. The stock reached its all-time high of $86.14 on February 27, and closed Friday at $61.38. Raymond James analyst Pavel Molchanov said in a research note that this pullback offers an enticing entry point, especially when there is a key near-term catalyst. The research firm has upgraded the stock from Market Perform to Outperform with a price target of $75.


This time SolarCity is likely to offer at least $100 million in notes

It’s the biggest short-term pull-back in SolarCity Corp (SCTY) stock since August 2013. The stock’s recovery from this correction may not be as fast as last fall’s six weeks. But there is a strong near-term catalyst. SolarCity is executing quite well despite the SG&A cost escalation, which reflects the side effects of skyrocketing growth. The research firm says that the San Mateo-based company’s position as the leading non-utility downstream pure play is secure. Any further market share gains will be “icing on the cake.”


Last November, SolarCity Corp (SCTY) priced its asset-backed solar bonds. The stock surged more than 11% on the day of the announcement. The next securitization is due in April. Even if the immediate response to the upcoming securitization isn’t as pronounced as the last one, it provides a potentially impactful catalyst. In November, the company had offered $54.4 million in notes due 2026. Markets were impressed by the relatively lower coupon of 4.8%. It represented an opportunity to slash the ‘headline’ cost of capital from the tax equity levels of 8% to 12%. This time, Raymond James expects SolarCity to offer at least $100 million in notes, which should potentially lower the coupon.

SolarCity to benefit from lower module prices

Raymond James forecasts lower per-watt margins through 2018 due to increasing competition in the solar market. But SolarCity Corp (SCTY) will benefit from lower module prices and declining cost of capital. The benchmark spot module pricing is currently at $0.664 per watt, and has been declining for the eleventh consecutive week. Three months ago, the module prices averaged $0.696 per watt. This price correction isn’t really needle-moving, but it is faster than expected.

SolarCity Corp (SCTY) shares ticked up 2.12% to $62.68 in pre-market trading Monday.

The post SolarCity Corp SCTY’s Recent Dip An Enticing Entry Point appeared first on ValueWalk.

-By Vikas Shukla

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