NEW YORK ( TheStreet) -- There's something happening with SolarCity (SCTY) .
Shares of the stock has dropped by 7.6% over the past three months into the mid $50s. Yet, several leading analysts have begun to upgrade the company -- the consensus rating now leans towards a strong buy.
The brightening forecast for SolarCity comes as shares of rival solar panel manufacturers First Solar (FSLR) and SunPower (SPWR) have also declined. Considering that current oil prices are at their lowest levels in years, what makes SolarCity so intriguing for analysts? Is this buy rating justified?
Probably not. SolarCity is facing challenges finding ways to boost profitability, changing utility rates structures and falling solar panels prices. These challenges call into question its business model. For now, the current high valuation and elevated debt burden are tilting the scale towards steering clear from this company at its current price.
At first glance, the company doesn't seem too impressive: It continues to lose money on a quarterly basis -- in the past quarter alone its operating loss was $74 million. Moreover, during the first nine months of the year its net earnings per share were 57 cents.
But one of the main reasons analysts like this company is its revenue growth: In the first three quarters, its net sales more than doubled compared to the same time frame last year.
Furthermore, the company continues to find ways to expand its operations: It recently joined with Bank of America Merrill Lynch to finance nearly $400 million in solar power projects for 2014-2015 and it extended its operations to western Massachusetts with a new operations center in Agawam.
Also, SolarCity entered an agreement with Wal-Mart Stores (WMT) to install new solar projects at facilities in up to 36 states for the next four years. Such agreements are likely to further enable SolarCity to increase its net sales in the coming years.