Solar power is a highly promising investment right now, but you need to be cautions and pick the right stocks. Some high-flying solar stocks are poised for a nasty tumble.
Despite that, Vivint (the former SunEdison acquisition target) is still down 60% year-to-date and these recent gains seem unsustainable. Nearly a third of the stock's float was shorted as of April 29.
Remain wary of these struggling U.S. residential solar providers. As we'll explain in a minute, there are safer and surer ways to make money. First, let's do the numbers on these too-risky stocks.
In early May, Vivint Solar delivered another earnings miss (two out of the last four quarters). Its first quarter earnings-per-share (EPS) of -$0.65 was a $0.04 miss. Pint-sized revenues of $17.2 million (+81.1% year-over-year) also fell short of expectations. In other news, the company's CEO Greg Butterfield stepped down a few days ago.
Remember, SolarCity was beaten down post-earnings after the company cut its 2016 installation guidance to 1GW-1.1GW from a prior 1.25GW (compares with 870MW in 2015).
It also remains a highly shorted stock. Billionaire Jim Chanos pointed out on SolarCity that the company loses money on every installation.
If Vivint Solar does the same, you can say goodbye to meaningful profits forever. Vivint Solar's first quarter cost-per-watt figure of $3.35 represents a major sequential increase and an increasingly uncompetitive cost structure. Unless you can lower costs, profits will always seem ungettable.
With SolarCity rapidly closing in on its $2.5 per watt target, Vivint Solar seems to be at a disadvantage.
Vivint Solar and SolarCity's business models are eerily similar. Vivint Solar's customers pay little to no money upfront, receive savings relative to utility generated electricity and are expected to continue to reap benefits from guaranteed energy prices over the 20-year term of their contracts.
Vivint Solar finances, designs, installs, monitors and services the solar energy systems for its customers. This is largely similar to SolarCity. Even with Elon Musk as chair, Solar City is facing tough times. To deliver growth, the company is veering towards multiple tracks -- but profitability continues to elude it (fourth straight year of losses in 2015).
The fact is, solar providers are grappling with a problem to deliver profits while they grow revenues at a faster clip. Naturally, the debt-meter starts buzzing alarmingly (debt is more than market cap).
There are a few who'd suggest how both SolarCity and Vivint Solar are charting different bends on the road, but make no mistake about these so-called paths. They lead to investor disappointment.
The projected sales growth numbers for both companies above 40%-plus year-over-year for the next two years points to a plethora of problems. While SolarCity may deliver faster growth than Vivint, we are interested in how much profit they could bring in. At this point, there is little clarity on those numbers.
As you can see, Vivint Solar and Solar City are terrible choices for your investment cash. But even if you're feeling wary of the stock market as a whole these days, there is a great way to earn extra income without touching stocks. In fact, by using this easy technique, you could rake in an extra $67,548 over the next 12 months -- GUARANTEED. Click here now for all the details.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.