Why SolarCity Shares Plummeted
Mar 9th 2013 8:45AM
Updated Mar 9th 2013 11:45AM
Shares of SolarCity opened down more than 11% this week after the company posted a wider-than-expected loss for its fourth quarter. Revenue for the period also came in below analysts' estimates, in what was SolarCity's first earnings report as a publicly traded company.
SolarCity, which leases solar panels to residential and commercial customers, entered the public market in December with an initial public offering price of $8 per share. Aside from this week's dip, the stock is up more than 61% year to date. That's impressive, considering that investors' confidence in the solar energy industry has deteriorated in recent years.
Nevertheless, SolarCity's fourth-quarter results proved that it's not immune to market volatility. The company posted a net loss of $1.10 per share, whereas analysts' were looking for a loss of $0.44 per share, according to Reuters. As far as revenue goes, SolarCity generated quarterly revenue of $25.3 million, which was markedly below analysts' forecasts for revenue of $36.67 million.
The company blamed the upsetting results on increases in its operating expenses during the quarter. Operating costs soared 70% to $37.9 million in the period, up from $22.3 million a year ago.
Lighting the way
However, it wasn't all bad news. SolarCity grew its customer base a whopping 243% last year, and installed more than $1 billion in solar energy systems, according to a company press release. If it can outshine this level of growth in the year ahead, current shareholders should be generously rewarded. The company also grabbed more energy contracts in 2012 with 26,327 contracts, or an increase of 269% over the prior year.
Looking ahead, new and ongoing partnerships with automakers including Honda and Tesla Motors should help SolarCity further expand its customer base in the quarters to come. Together with Honda, SolarCity will finance $64 million in solar installations for Honda and Acura drivers. Separately, SolarCity is helping Tesla install its Supercharger network across the United States. Tesla's solar-powered carports let EV drivers charge their cars free in record time.
Unlike other solar stocks, SolarCity's business model offers consumers affordable solar energy options. Specifically, the company's lease model allows homeowners to reap the benefits of solar power simply by paying SolarCity a low monthly fee. This is also a plus for SolarCity, because it means the company can count on a continual stream of cash.
Given the company's solid business plan, growing customer base, and promising partnerships, I wouldn't count this energy company out just yet. One bad earnings report doesn't doom a stock for eternity.
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The article Why SolarCity Shares Plummeted originally appeared on Fool.com.Fool contributor Tamara Rutter owns shares of Tesla Motors. For more investing insight, follow her on Twitter, where she uses the handle @TamaraRutter. The Motley Fool recommends Tesla Motors and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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