NEW YORK (TheStreet) -- Shares of SolarCity Corp. (SCTY) are higher by 3.84% to $55.17 in mid-morning trading on Tuesday, as solar stocks get a boost from reports that First Solar (FSLR) - Get Report and SunPower (SPWR) - Get Report are in talks to form a joint yieldco venture.
Shares of First Solar are up by 15.29% to $57.23 and SunPower is higher by 16.65% to $32.52 this morning.
The entity will offer power under long term contracts and will pay out a large portion of its cash flow to its shareholders, the Wall Street Journal reports. In the past both companies have made separate statements regarding the possibility of forming yeildcos.
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It is expected that SunPower and First Solar will contribute a portfolio of solar-generated assets from their existing holding and then file for an IPO for the yeildco, the Journal added.
Other solar stocks rising today include Vivint Solar(VSLR) - Get Report , higher by 1.79% to $8.23, SunEdison up by 3.07% to $23.15, and Nextera Energy Partners (NEP) - Get Report , higher by 1.32% to $41.55 this morning.
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, weak operating cash flow, poor profit margins, generally high debt management risk and generally disappointing historical performance in the stock itself."
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 113.3% when compared to the same quarter one year ago, falling from $26.69 million to -$3.56 million.
- Net operating cash flow has significantly decreased to -$135.52 million or 1507.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for SOLARCITY CORP is rather low; currently it is at 20.84%. Regardless of SCTY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SCTY's net profit margin of -4.95% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 2.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SCTY's quick ratio is somewhat strong at 1.26, demonstrating the ability to handle short-term liquidity needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.30%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 114.28% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: SCTY Ratings Report