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Short SolarCity despite continued Increase in Sales

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Why is SCTY a Short?

SolarCity(SCTY) is a systems installer company in the US, which it either sells or lease to its customers. The company gave good revenues in the last quarter and was successful in increasing its customer base. However the company’s main area of business is in residential segment and that too concentrates its activities in USA. The company has very little presence in the utility and commercial segment. In today’s cut-throat solar industry, where companies are exploring various avenues in solar energy, SolarCity has failed to prove itself. The company might have taken the advantage of the vast opportunities in the USA in the initial years, but with the passing years it is getting more and more difficult. Also one should not forget the competition in the system installation business in USA from other companies like First Solar (FSLR) SunEdison (SUNE) and SunPower (SPWR).

SolarCity reported an outstanding 61.6% increase in revenues on a yearly basis. The company’s figures for Operating leases and solar energy system incentive revenues were up ~109% from the last year and 48.5% from the last quarter.

Revenue (in thousand $) Q2 2014 Q1 2014 Q2 2013 YoY(%) QoQ(%)
Operating leases and solar energy system incentive 43,181 29,072 20,608 109.54 48.53
Solar energy system sales 18,153 34,474 17,341 4.68 -47.34
 Total 61,334 63,546 37,949 61.62 -3.48


However, the company was unable to generate operating profits. I hope the company’s efforts in marketing and R&D pays off in the future, because it spends a lot on them.

The company has concentrated activities in USA and a very little presence in Asia and Europe. The Asian countries are poised to become the solar power in the years to come and hence SolarCity might lose on that front. The stock is currently trading at $ 70.99, which is trending near to its 52 week high price of $ 88. 35. The company’s P/E is undefined and P/S and P/B are at ~28x and 11x respectively, which aren’t very attractive either. Though, USA is concentrating on residential segment and is making efforts to capture on this front, I remain skeptical about SolarCity on winning on this front given massive competition in USA. The company really need to tighten its seat belts and give profits and strong and reliable customer base to emerge as a winner there!


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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