SolarCity Corp Investors Will Stay 'Pressured' Until This Happens

February 8, 2016

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According to a recent research report by UBS out Monday, amid a “different story” being told by investors compared to company data, SolarCity Corp (NASDAQ: SCTY) is laying the landscape for continued pressure moving forward, at least in the near term.

With the company earnings call scheduled for Tuesday at 5:00 p.m. EST and the earnings release Wednesday at 4:00 p.m. EST, SolarCity has garnered a sliver of the spotlight from investors and analyst alike this week.

Ahead Of Earnings: ‘Financing Over Execution’

UBS analysts began their pre-earnings analysis by pointing out that the issue is “poised to provide sell-down update,” citing that “expectations for asset sell-down value appear to be in a range of 7–9 percent unlevered, net of tax equity, driving a range of $3.00–3.30/W in gross monetization.”

The analysts elaborated that the experienced pressure will continue “until there is confidence on ability to execute on a sustainable financing plan.”

However, the firm did emphasis that year-over-year trends for SolarCity have come in good so far, with growth increasing, approvals up (exc. December) and increased market share from 2014 to 2015.

UBS was quick to remind, however, that investor data does not correlate with the data points currently available against the backdrop of the solar sector in California. “Conversely,” the analysts explained, “investor data illustrates that the top-5 manufacturers take nearly the entire market in CA. Market share of the top-5 installers reached 88 percent in 2015, up from 63 percent in 20134. For example SolarEdge’s market share increased from 12 percent in 2013 to 18 percent in 2014 in CA, but decreased back to 12 percent in 2015. The top-3 manufacturers (ABB, SMA, Enphase) saw share decrease slightly from 70 in 2013 to 62 percent in 2015.”

The Valuation

In conclusion, UBS advises investors to hang tight. “We maintain our $33 SOTP Price Target ahead of 4Q, which should provide a critical update on both strategy as well as sell-down value off which investors will key valuation on the wider portfolio.”

UBS has a Neutral 12-month rating on SolarCity, with an attached price target of $33.

At the time of this writing, SolarCity was trading donw 4.71 percent on the day at $26.62.