By Harris
Roen
The latest earnings numbers released by SolarCity
(NASD:SCTY)
show a mixed bag of results. Total revenues have been rising for
the past 4 quarters, and the number of customers SolarCity is
signing up continues to soar. All is not rosy, though, as
operating expenses relative to net loss continue to increase. This
article dives into the reported numbers, looks at important
customer trends, and asks whether SolarCity is still a stock worth
investing in.
Revenues: Not a record, but steady growth
Revenues for the third quarter came in strong for SolarCity, at
$48.6 million. This is a 52% increase in revenues over the same
quarter last year, though it is still far below the record set in
June 2012. Still, income has been rising in a straight-line
direction for the past four quarters, and fourth quarter revenues
are projected to be steady or rising.
Net income, on the other hand, has not fared so well. The first
three quarters of 2013 have shown large losses. SolarCity reveals
that in the most recent quarter it hemorrhaged $34.6 million.
Total current assets have remained steady for the company since
the last quarter at around $312 million. However, the cash portion
of those assets dropped 17% to $133 million. So while it looks
like SolarCity can sustain losses for a few more years on its
current tack, this trend of negative net income must turn around
in order for the company to remain viable for the long-term.
Revenues projected to rise
Revenues are projected to continue a steady increase for
SolarCity on an annual basis. According to the company’s latest
guidance, money coming in from leases and sales are expected to
grow to between $157 million to $163 million for all of 2013. That
means about a 25% increase over 2012 revenues, and about five
times the revenues of just three years ago.
Expenses continue to increase
Since the revenue side of the equation is solid for SolarCity,
high expenses are the cause of continued losses for the company.
Total operating expenses deepened for each quarter of 2013, now at
$46.2 million. So far for 2013, expenses are greater than for all
of 2012.
Know your customer
In order to understand when a mass-market company like SolarCity
is likely to become profitable, one must understand the nature of
its customer base. Questions to be answered include how fast is
the customer base growing, how much does it cost to get a new
customer, and how much money does each customer generate.
Customers have been added at a steady clip the past three
quarters. In fact, the third quarter of 2013 added almost twice as
many clients as were added in the first quarter of the year.
Already year-to-date, SolarCity has added almost as many customers
as it did in the banner year of 2012.
Revenues per customer, however, have remained flat, at around
$600 per customer per quarter. (Note that revenues per
customer look much larger for the annual data on the chart, but
those numbers account for a full four quarters of income. When
revenues per customer are projected out for all of 2013, it
lands in the $2,500 range).
It is a bit hard to tell from the chart, but net loss per
customer has been shrinking in 2013. It is down 30% since the
first quarter, from a loss of $601 per customer to a loss of $421
in the third quarter. Likewise the acquisition cost per customer
is dropping, down 29% from the first quarter to just under $2,000.
These are both positive trends, and if they continue, will play an
important role in bringing about profitability.
Is SolarCity still a good investment?
Though it is in the solar business, SolarCity is essentially a
finance company. It uses billions of dollars of variable interest
entity (VIE) investments, long and short-term debt, tax credits
and stockholder equity to create leases, notes and other equities
to generate income. As I have stated before, SolarCity as an energy
stock is a speculative investment any way you slice it. It
has yet to turn a profit, and consensus estimates are betting that
it will still have negative earnings in 2014 and 2015. Because
earnings results were good but not stellar, the stock has given up
about 15% of its value from its high a week ago.
Having said that, there is no doubt that SolarCity
is a well-positioned company in the growing field of solar
installs. Last quarter alone it deployed 78 megawatts of
photovoltaics. That is greater than what was installed in all of
2011, and about 70% of all megawatts SolarCity installed in 2012.
If acquisition cost per customer drops below the $1,000 range, and
if the company continues to grow its bottom line to swing net
revenues per customer in a positive direction, then current prices
for SolarCity will likely be justified. As such, I see SolarCity
as a long-term hold for the investor that can stomach volatility,
rather than a traders stock.
DISCLOSURE
Individuals involved with the Roen Financial Report and
Swiftwood Press LLC owned or controlled shares of TSL.
It is also possible that individuals may own or control shares of
one or more of the underlying securities contained in the Mutual
Funds or Exchange Traded Funds mentioned in this article. Any
advice and/or recommendations made in this article are of a
general nature and are not to be considered specific investment
advice. Individuals should seek advice from their investment
professional before making any important financial decisions. See
Terms of Use
for more information.
http://www.altenergystocks.com/archives/2013/11/solarcity_crisis_or_opportunity.html
No comments:
Post a Comment