SolarCity (SCTY) Stock Soars on $100 Million Silver Lake Kraftwerk Investment

SolarCity (SCTY) stock is popping in mid-morning trading on Wednesday, after the company announced a $100 million investment by Silver Lake's energy and resource innovation fund.
By Amanda Albright ,

NEW YORK (TheStreet) -- SolarCity  (SCTY) stock is climbing by 2.51% to $26.65 in mid-morning trading on Wednesday, after the renewable energy company announced a $100 million investment by Silver Lake Kraftwerk.

The private equity firm's energy and resource innovation fund will invest $100 million in SolarCity, the company announced today.

Additionally, SolarCity Board Chairman Elon Musk will invest $10 million and CEO Lyndon Rive will invest $3 million in the company.

"We think the Company's unparalleled access to solar-specific tax equity, asset-backed security and debt clearly differentiates it from providers that are funding projects constantly via equity markets," said Josh Raffaelli, managing director of Silver Lake Kraftwerk, in a statement. "Furthermore, we firmly believe that SolarCity's near term focus on cost reduction and cash flow breakeven is absolutely the right strategy-the Company is already the leader in both commercial and residential solar.

The $100 million investment by Silver Lake Kraftwerk is almost four times the size of its initial investment in February 2012, the company said.

Separately, TheStreet Ratings team rates SOLARCITY CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate SOLARCITY CORP (SCTY) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electrical Equipment industry. The net income has significantly decreased by 199.2% when compared to the same quarter one year ago, falling from $19.24 million to -$19.07 million.
  • The debt-to-equity ratio is very high at 3.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, SCTY has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electrical Equipment industry and the overall market, SOLARCITY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SOLARCITY CORP is rather low; currently it is at 22.21%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -16.75% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$214.40 million or 851.28% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: SCTY

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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