This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why SolarCity Is Shining Once Again for Investors

NEW YORK (TheStreet) -- SolarCity (SCTY - Get Report) just announced the acquisition of Silevo, a solar technology and manufacturing company whose modules have achieved a unique combination of high energy output and low cost.

Solar City is a name I owned earlier in the year but I sold the stock back in April. Although I do not currently own the stock, it is still an interesting company to keep an eye on, particularly given its close connection to Elon Musk.

Solar City's new plant in Buffalo will be one of the biggest in the world and is reminiscent of Tesla's (TSLA) planned Gigafactory, the enormous battery manufacturing facility that will produce lower cost batteries. The SolarCity PV panel plant will be powered substantially through hydroelectric power generated by the nearby Niagara Falls.

The acquisition news was well received by the market and the stock traded up significantly, closing Wednesday at $67.15, up over 18% for the year to date.

Basically, SolarCity is buying competitive advantage in cost and supply, much like Tesla plans to do with battery technology. SolarCity said on the conference call it's concerned that a few years down the road there will not be enough panel production to fit the company's needs.

There also may be other acquisitions and partnerships in the future with the aim of expanding low cost capacity. Another interesting note: famed serial entrepreneur Elon Musk was on the conference call. He may not run SolarCity but he is actively involved in the company's management.

SolarCity's CEO Lyndon Rive, is Elon Musk's cousin. Elon Musk, Tesla's CEO and chairman and the founder and CEO of SpaceX, is also the Chairman of SolarCity. This linkage is particularly significant given the potential business synergies between SolarCity and Tesla Motors.

SolarCity offer investors an attractive way to invest in the growing solar industry with a recurring revenue model. Up until this acquisition, the company did not manufacture its own solar panels, meaning that its financial results were not negatively impacted by declining solar panel prices and margin pressure. So this move signifies a change in strategic direction, but is not entirely unexpected.

The Leasing Model

SolarCity sells solar panel systems to residential and commercial customers, but the bulk of its business comes from the leasing side. SolarCity will generally install a system for free in exchange for a 20-year lease contract. SolarCity utilizes tax incentives and third-party financing (including crowdfunding) to cover the installation costs.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
SCTY $50.17 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs