Why SolarCity (SCTY) Shares Are Down Today

NEW YORK (TheStreet) -- SolarCity (SCTY) was falling 6% to $59.92 Thursday after the solar panel provider priced the second securitization of its subsidiary SolarCity LMC Series II.

The company announced the pricing of the offering of $70.2 million with an interest rate of 4.59% and an anticipated repayment date of April 2022. The notes were priced on April 2, and the sale of the notes is expected to close on April 10.

SolarCity LMC Series II will secure the notes by, and pay them from the cash generated by, a collection of photovoltaic systems and related leases, power purchase agreements,, and ancillary rights and agreements. The subsidiary is responsible for the notes, and they aren't insured or guaranteed by SolarCity.

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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 a number of negative factors, 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 weak operating cash flow, poor profit margins, generally high debt management risk and feeble growth in its earnings per share."

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

  • Net operating cash flow has significantly decreased to -$8.43 million or 113.02% 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 20.82%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 56.43% has significantly outperformed against the industry average.
  • The debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SCTY has managed to keep a strong quick ratio of 1.89, which demonstrates the ability to cover short-term cash needs.
  • SOLARCITY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOLARCITY CORP reported poor results of -$0.75 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 244.0% in earnings (-$2.58 versus -$0.75).
  • 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.
  • You can view the full analysis from the report here: SCTY Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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