SolarCity Corp (SCTY) pays low prices to solar manufacturers and is expected to benefit from decades-long energy savings, and it stands out as the only player with the liquidity and the market cap offering exposure to the part of the solar energy value chain that is expected to see the most value, says Aaron Chew, Vice President of Equity Research and Senior Alternative Energy/Solar Analyst at Maxim Group LLC.
“My thesis on SolarCity is that it is an amazing company, with impressive growth prospects, solid cash flow generation and returns on invested capital. It’s such a unique business model that I don’t think investors are going to have an easy time getting their hands around this,” Chew said.
Chew says the difficulty in understanding SCTY’s business model can be traced to GAAP-accounting, which requires immediately reporting of expenses of assets which are expected to long-term gains. He expects the company to report EPS losses for the next few years, and gains to be realized in 20 to 30 years.
“The challenge with investing and valuing SolarCity is that what they do is they sign a 20-year lease, so there is going to be a tendency every time they report earnings for everyone to say the revenue is only ‘X;’ but really, if you sign $1 billion in 20-year contracts right now, it’s going to show up as $50 million in revenue,” Chew said.
SolarCity Corp. (SCTY) Reduces Upfront Solar Energy Costs and Benefits from Cheap Modules
February 22, 2013
Will Rooftop Solar Securities Turn SolarCity (SCTY) to REIT? Lazard (LAZ) and Raymond James (RJF) Analysts See Developing Market
August 16, 2013
SolarCity Corp (SCTY) Could Issue Larger Asset-Backed Securities in 2014
February 28, 2014
Uranium Captures Investor Interest After Fukushima
April 29, 2011
Transocean Ltd. (RIG) Captures Investor Attention with New Management and Rising Stock
February 07, 2013
