Why SolarCity (SCTY) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of SolarCity Corp. (SCTY) are down 0.51% to $66.66 after it was reported that the Elon Musk-backed solar energy systems company will soon lose its place as the only U.S. publicly traded solar installer, just as residential solar power emerges as one of the most exciting themes in clean energy and generates strong investor interest, according to MarketWatch.

Blackstone Group (BX) backed Vivint Solar said Thursday it plans to sell 20.6 million of its shares at $16 to $18 a piece, hoping to raise between $370 million and $426 million. The shares will trade under the ticker VSLR on the New York Stock Exchange, the company said in an SEC filing.

SolarCity is the largest U.S. solar installer, with a nearly 30% share of the market. Vivint Solar is second, with a 9% share, MarketWatch said.

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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 unimpressive growth in net income, generally high debt management risk, weak operating cash flow and feeble growth in its earnings per share."

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 decreased by 20.8% when compared to the same quarter one year ago, dropping from -$39.46 million to -$47.65 million.
  • The debt-to-equity ratio of 1.48 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SCTY maintains a poor quick ratio of 0.93, which illustrates the inability to avoid short-term cash problems.
  • Net operating cash flow has significantly decreased to -$36.49 million or 149.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • SOLARCITY CORP reported flat earnings per share in the most recent quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SOLARCITY CORP reported poor results of -$0.80 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 406.3% in earnings (-$4.05 versus -$0.80).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. 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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