NEW YORK (TheStreet) -- SolarCity (SCTY) shares are up by 9.01% to $56.85 in afternoon trading on Monday, as the stock benefits from a merger between two of its rivals.

SunEdision (SUNE) announced the purchase of Vivint Solar (VSLR) for $2.2 billion before the opening bell today. SunEdison is offering Vivint shareholders $9.89 per share in cash, $3.31 in stock and $3.30 in notes, for a total of $16.50 for every share they hold.

The per share purchase price represents a 51.7% upside from the stock's closing price on Friday.

SunEdison's TerraForm Power (TERP) unit will acquire Vivint's rooftop solar portfolio, which will consist of 523 megawatts by the year's end, for $922 million in cash as part of the deal.

"We want to accelerate how fast we penetrate that market. We're just seeing the first of the renewables supermajors and SunEdison will be at the top," SunEdison chief strategy officer Julie Blunden told Bloomberg.

SolarCity shares are trading on heavy volume today, with 3.8 million shares having exchanged hands so far, well over the stock's daily trading average of 2.2 million shares.

Separately, 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 several weaknesses, 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 high debt management risk, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself."

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

  • The debt-to-equity ratio is very high at 2.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SCTY maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
  • Net operating cash flow has significantly decreased to -$171.28 million or 634.86% 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 currently lower than what is desirable, coming in at 32.25%. 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 -31.89% significantly underperformed when compared to the industry average.
  • SCTY has underperformed the S&P 500 Index, declining 18.60% 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.
  • You can view the full analysis from the report here: SCTY Ratings Report

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