SolarCity (SCTY) Stock Surging Today on New Walmart Project Deal

NEW YORK (TheStreet) -- Shares of SolarCity Corp. (SCTY) are up 4.38% to $55.98 in pre-market trade after the company announced that it has entered into contract with Walmart Stores  (WMT) for the installation of new solar projects at facilities in up to 36 states over the next four years.

SolarCity has completed more than 200 solar projects at Walmart locations since 2010. SolarCity has also installed and tested energy storage projects co-located with solar power generation at 13 Walmart facilities since early 2013, and will be incorporating ten additional storage projects in the next year.

Since the company's last announcement, SolarCity has installed nearly 50 solar projects for Walmart.

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 generally disappointing historical performance in the stock itself, generally high debt management risk and feeble growth in its earnings per share."

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

  • SCTY has underperformed the S&P 500 Index, declining 5.72% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Currently the debt-to-equity ratio of 1.96 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, SCTY has managed to keep a strong quick ratio of 1.58, 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 -$0.80 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 372.5% in earnings (-$3.78 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.
  • 44.52% is the gross profit margin for SOLARCITY CORP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 32.97% significantly outperformed against the industry average.
  • You can view the full analysis from the report here:SCTY Ratings Report
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