EmergingGrowth.com, a leading digital financial media company, discusses Solar City (NASDAQ: SCTY) and the Rise of Affordable Solar Energy. Also discussed is First Solar (NASDAQ: FSLR), Tesla Motors (NASDAQ: TSLA) Walmart (NYSE: WMT), and others.
Solar companies have gotten a bad rep over the past few years. With high costs and no earnings in sight, how could you love them? First Solar, Inc. (NASDAQ: FSLR) is widely considered to be the leader of the industry, but even the leader has seen its share price fall from $300 in 2008 to its current $30. However, there is a new contender in the mix, SolarCity Corp (NASDAQ: SCTY). SolarCity recently went public on December 12, 2012 at $8 a share, raising $125 million. In a little over a month since the stock started trading, it is up 37%.
Unlike its competitors, SolarCity does not just come by and install solar panels. Instead, they evaluate the energy usage of the residence, business, etc and provide solar solutions based on energy consumption. This makes the solar process more efficient and effective. However, the company does not just sell solar solutions. The company also has customers who buy electricity directly from SolarCity. In fact, Tesla Motors (NASDAQ: TSLA) lists SolarCity as the preferred electric charging station installer. SolarCity’s other high profile customers include Wal-Mart Stores, Inc. (NYSE: WMT), Intel Corporation (NASDAQ: INTC) and the US Government.
Another aspect that makes them so unique is that they require no upfront cost to the customer. Instead, there is a 20-year contract that is paid monthly. No wonder the solar company registered 31,641 customers at the end of June 2012. Additionally, SolarCity has protected its unique business model with 6 patents as of August 31, 2012 and 17 other patents are currently under review.
Moving on the financials, SolarCity is currently valued at $1.16 Billion and currently has no price to earnings. Price to sales comes in high at 9.3 and price to book is a little overvalued at 1.51. The main issue I see with SolarCity right now is its total debt to equity of 2.52, while only having .67 cash per share. On the bright side, earnings per share are expected to rise 112.6% this year and 12% next year. These are nice growth numbers that will help SolarCity gain a more attractive fundamental picture. Keep in mind that some of these fundamental metrics are overvalued due to the newly traded stock’s upward explosion. In other words, do not chase SolarCity here, wait for a pullback before considering opening a position.
The bottom line here is that SolarCity is lined up to be a great long-term investment. The company adds a fresh twist to ailing industry that has been stuck in neutral for years. The company offers great incentives to new customers such as a $500 gift card and no upfront cost on solar panel installation. Additionally, the company diversifies by offering to sell electricity that is cultivated from solar panels. SolarCity has taught bears a lesson, their unique business model is a winner over the long term.
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