SolarCity: Is It Really So Difficult?

The Motley Fool
Understanding SolarCity: Things to Know When Earnings Come Out
Here’s a look at what you should watch for when the company reports on July 29.

…One of the things that’s probably affected the company’s stock price over that time is how complex it can be to understand the company. And that makes sense, because there really isn’t another company out there that’s built the same way, and that makes it more of a challenge to value. Factor in the up-and-down results in the company’s commercial solar business that caused management to miss guidance recently, and it’s understandable why the market has taken a step back.

However, just because it takes a little more effort for Joe (and Josephine) Investor to understand the company doesn’t make it a poor investment. It’s really just a matter of understanding the key parts of the company’s business, and how they affect the company’s ability – both today and in years to come – to make money……

I find excuses about “complexity” to generally be a big red flag. I have a position in and around SolarCity and I don’t find the company all that difficult at all. 1. Taking on huge amounts for a young public company with an untested management in tough choppy markets and 2. Using that debt to finance your own sales and customers.

What’s so difficult?

Investing for Dummies. Seriously, that’s the name of the book.…

That’s exactly what I remember happening to Cisco, it and its customers were financing customer debt and when debt comes crashing down around even a company like Cisco, let alone a junior like SolarCity, it isn’t good. Doesn’t take much to get that intertwined ball rolling downhill fast. “Visibility is bad”, Chambers said, meaning everything he saw was unbelievably bad. All at once, from the ultimate go-go mo-mo stocks to a lot of rubble.

Anyway, short interest in SolarCity is over double that of a year ago, days to cover is 5X. Stock weak last three months of course but mostly good times for shareholders, so far. General Electric…Goldman Sachs…Cisco…

And tiny SolarCity is a tough one? OK. What so difficult about a huge amount of debt taken on in a very short time, by an unproven management? I don’t see it. Seems like a big excuse, and sprinkles are for winners, excuses just excuses. As always. Weak ahead of earnings this week.


So, when debt becomes more expensive with rising interest rates, they could be in trouble. Add to that very low energy prices. Add to that the big tax credits are due to expire (is it 12/31/15?).

On the upside, they are connected to Elon Musk, not that he can’t blow up a rocket every now and then. But I suspect the Gigafactory will use some of their batteries for home storage associated with Solar City’s commercial and residential installs. That might allow home owners to sell back more energy to the electric companies at unfairly high rates.

What to do, what to do.

Add to that the big tax credits are due to expire (is it 12/31/15?)

Federal tax credit is 30% for commercial and 30% for residential.

It remains in place until December 31, 2016.

After December 31, 2016, the residential credit drops to zero and the commercial tax credit drops to 10%.…

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