SolarCity (SCTY) Stock: Weak On High Volume Today

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.

Trade-Ideas LLC identified SolarCity ( SCTY) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified SolarCity as such a stock due to the following factors:

  • SCTY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.5 million.
  • SCTY has traded 490,252 shares today.
  • SCTY is trading at 4.18 times the normal volume for the stock at this time of day.
  • SCTY is trading at a new low 3.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on SCTY:

SolarCity Corporation designs, manufactures, installs, maintains, monitors, leases, and sells solar energy systems to residential, commercial, government, and other customers in the United States. Currently there are 8 analysts that rate SolarCity a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for SolarCity has been 2.6 million shares per day over the past 30 days. SolarCity has a market cap of $5.8 billion and is part of the technology sector and electronics industry. The stock has a beta of 2.97 and a short float of 31.8% with 7.39 days to cover. Shares are up 15.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SolarCity as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, poor profit margins, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 significantly decreased by 113.3% when compared to the same quarter one year ago, falling from $26.69 million to -$3.56 million.
  • Net operating cash flow has significantly decreased to -$135.52 million or 1507.93% 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 20.84%. Regardless of SCTY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SCTY's net profit margin of -4.95% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 2.08 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SCTY's quick ratio is somewhat strong at 1.26, demonstrating the ability to handle short-term liquidity needs.
  • SOLARCITY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 continued to lose money by earning -$0.63 versus -$0.81 in the prior year. For the next year, the market is expecting a contraction of 883.3% in earnings (-$6.20 versus -$0.63).

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