SCTY TSLA: TLSA battery demand huge!…

Basically sold out through the first half of 2016!! Musk said that lots of the preorders are coming from Germany and Australia where the batteries make economic sense. But he added that there are many people who will buy them even though they don’t make economic sense versus using grid energy; some people just want them.

I think that the battery will really enhance demand for rooftop solar.

I bought back into SCTY a few weeks ago and added some today to get up to a 2.3% position. I think solar’s growth is becoming more inevitable and SCTY has the lead with 40% market share. They are making the economics work for people who need power and for institutions (many of the largest and most prestigious banks in the world) that are funding the installations. The economics also work for SCTY as they retain a portion of the value. You can look at GAAP EPS or even any form of adjusted EPS with SCTY because the upfront installation cost is immediate while the revenue stream is over a long period. SCTY came up with some new metrics that can be used to value the economic value created.



Much as I enjoy your enthusiasm and zeal, Chris, I suggest you temper those a bit when it comes to the solar industry and battery storage. Consider this:

SolarCity says ‘No thanks!’ to Tesla’s new battery

Tesla’s new home battery might not be ready for prime time.

SolarCity doesn’t think one of the new Tesla batteries is right for its solar-panel business.

I get a big kick outta Elon Musk. He’s quite a character, and he’s willing to put his money where his mouth is. Even so, he’s become a cult favorite and his forays into new territories may not be as economically successful as he might hope.

I happen to be a big believer (and an investor) in the solar industry. But SolarCity is no longer one of the horses in my portfolio.

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I think Chris’s ‘enthusiasm and zeal’ might be justified in this case; you might want to review the earnings call transcript where Musk addresses the SolarCity pronouncement in detail.

In short, SolarCity’s lack of 7kWh uptake is effectively immaterial.

And I’d be curious to know where you’ve put your bets (sticking to the horse analogy) on solar, with SolarCity out to pasture.

  • Khleb

Below is a response in italics (and my response) to my post on the SCTY RB board. Imagine how many more people will sign up for SCTY residential rooftop solar when TSLA says priority for residential battery will go to SCTY customers…

Yea, the batteries will need to make economic sense in the long term to get mass consumer adoption, but for right now, I’m satisfied with huge battery demand while they figure out how to make this entire process / system more economical.

It really depends what is considered short term.

  1. Telsa batteries not available until Q4.

  2. Listen to the first 30 minutes of the TLSA conference call. Demand will be irrelevant for a long time as TLSA will not be able to make enough batteries to meet demand for a long time. Musk said that gigafactory can produce 50 gWh per year and 30% of that is reserved for stationary battery with the priority going to cars. Based on this initial (and it’s only been 1 week of preorders!!!) demand Telsa won’t be able to meet demand from these preorders until halfway through 2016. Now, they are already exploring increasing the gigafactory by 50% (based on this early demand for the stationary batteries). So demand is not the issue and won’t be for the foreseeable future. Breaking down demand further into commercial and residential stationary batteries, commercial demand will be 80-90% of the stationary demand with residential only comprising 10-20% (again based on these very early preorder breakdown numbers but Musk thinks it’s more likely the 10% number). So if they increase the gigafactory capacity to 75gWh and the extra goes entirely to stationary then they will have capacity for stationary of 40 gWh with 4 gWh going to residential. Remember also that the demand is global and SCTY basically operates only in the US market now. If the average home for the battery buys a 15 kWh battery then only about 250,000 homes (globally with many going to Germany and Australia) would be able to get a battery because supply will be constrained. In the US there are more than 75,000,000 single family homes so so an initial demand of the entire capacity of 250,000 battery systems (again assuming that none would be sold outside the US), only 0.33% of single family homes would be able to get one initially. This scarcity will fuel additional demand. I think Telsa will need to build a few more gigafactories, and economics for residential will not matter for several years.

  3. Given #1 and #2, I think that you are correct that the batteries will not significantly impact SCTY installations that much through actual battery purchases, but I think it will raise awareness and create additional demand for solar nonetheless. Yes, they need to be economical to get mass consumer adoption but mass consumer adoption would be incredibly enormous to TLSA and SCTY. I don’t think mass adoption will be necessary for a long time.



And I’d be curious to know where you’ve put your bets (sticking to the horse analogy) on solar, with SolarCity out to pasture. - Khleb

There’s lots of interest in the solar sector, and this has come up several times. Here’s what I posted on the Hounds board in February:…

Given that I swing trade, my holdings have changed a bit (for the present): ENPH is now a 9% position. Note, I added to the position yesterday when the stock price cratered. I believe shares are now trading at a bargain price. Here’s a one-year chart:

As one can see, ENPH climbed from ~$8 to ~$17 then dropped and settled into a saw tooth pattern wherein it bounced between $10 - $15 several times. I caught most of those price changes and, as a consequence, am warmly disposed towards this company. This company is growing nicely and is viewed favorably in the analyst community (with some exceptions). It was fascinating to watch how the underwriters for the SolarEdge (a string-inverter manufacturer) IPO issued downgrades for ENPH prior to the SEDG IPO. As a result, there’s considerable short-interest in ENPH at present. In this case, I consider that a positive. SEDG was once a dominant inverter provider (as a private company) that subsequently lost considerable market share to ENPH. I’ll also note that ENPH teamed with home system installers/battery makers to offer whole house energy systems that are now being installed/evaluated by sever major homebuilders. This was happening well before Elon Musk’s media event.

Moving on: I hold 1% positions in SUNE, FSLR and SPWR. I had held larger positions in SUNE and FSLR, but cashed out the profits recently after shares had increased by 25% - 50%. I cashed out my SCTY shares after a nice gain (~$45 to ~$60).

At present, I’m looking for good entry points to repurchase SUNE and FSLR shares. The entire sector is quite volatile and I’ve no doubt good opportunities will come and go. It helps to be a research fanatic and chart-watcher to swing trade this sector.

Hope you found this useful.