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SolarCity Inferno Chars Sunrun, SunEdison, SunPower, First Solar

SolarCity ( SCTY ) stock combusted Wednesday after the No. 1 residential installer guided to weak Q1 installations and failed to assuage investor concerns about the rising cost of capital. The resulting conflagration charred rivals Sunrun ( RUN ), SunEdison ( SUNE ), SunPower ( SPWR ) and First Solar ( FSLR ), shares of which were down 13%, 6.5%, 4% and 2.5%, respectively, in midday trading Wednesday. IBD’s 26-company Energy-Solar industry group was weaker by more than 10%. In early trading on the stock market today , SolarCity stock crashed as much as 38%, touching a 34-month low at 18.26. By midday, shares were down 17%, above 21. Wall Street was split on SolarCity’s prospects. While at least three analysts slashed their price targets on SolarCity stock, another boosted his price target, and two analysts upgraded the shares. For Q4, SolarCity reported a per-share loss ex items of $2.37, widening from $1.33 in the year-earlier quarter. Sales grew 61% to $115.5 million. Both measures beat analyst expectations and SolarCity’s earlier outlook. SolarCity losses are expected to widen in Q1. SolarCity guided to per-share losses ex items of $2.55 to $2.65, deepening from $2.36 in the year-earlier quarter. Analysts polled by Thomson Reuters had modeled a loss of $2.36 a share ex items. Nevada Withdrawal Snags Installations Installations of 272 megawatts in Q4 and 870 MW for all of 2015 were each slightly short of SolarCity’s earlier guidance. The installer previously saw 280 MW to 300 MW for the quarter, and 878 MW to 898 MW for the year. Current-quarter views for 180 MW, up 18% year over year, don’t jibe with 2016 guidance for 1.25 gigawatts, up 44%, Needham analyst Y. Edwin Mok wrote in a research report. Mok retained his hold rating on SolarCity stock. CEO Lyndon Rive blamed SolarCity’s exit from Nevada and 15 MW in commercial project push-outs to Q1 for the December-quarter installation miss. Commercial installations of 51 MW in Q4 were below guidance for 80 MW to 90 MW. The commercial push-outs could snag guidance, Mok wrote. “We believe the Q1 and 2016 outlooks require SolarCity to complete a large amount of commercial projects, which clearly have timing risks,” Mok wrote. Solar, Wind Vie For Capital SolarCity’s 44% growth target for 2016 is predicated on the company’s access to capital, Credit Suisse analyst Patrick Jobin wrote in a report. At year’s end, SolarCity had $658 million in committed tax equity funding, providing about 510 MWs of runway. And the cost of capital is on the rise . In December, Congress extended key subsidies underpinning the solar and wind industries, and now more competitors are vying “for the same capital pool,” Jobin wrote. “Investors continue to fear cost-of-capital increases could jeopardize the positive spread (SolarCity) is earning,” he wrote. But SolarCity can raise $2.73/watt in financing, above its all-in $2.71/watt cost, Jobin wrote. That “indicates to us that the equity return is explicitly positive,” he wrote. On the flip side, the cost of capital differs between companies, and Sunrun’s more flexible structure has allowed it raise capital at a more attractive rate than SolarCity. Jobin cut his price target on SolarCity stock to 89 from 124 but reiterated his outperform rating.

Akamai Stock Jumps On Q1 Beat, Despite Apple, Facebook Trend

Akamai Technologies ( AKAM ) stock jumped Wednesday after the CDN services provider late Tuesday reported Q1 earnings and revenue that topped analysts’ lowered expectations and gave in-line current-quarter profit guidance. Shares of Cambridge-based Akamai were up 23% in midday trading in the stock market today , near 49. Akamai is the biggest provider of content-delivery network (CDN) services to media and entertainment companies. Akamai said it earned 72 cents per share in Q4, up 3% from the year-earlier period, with revenue rising 8% to $579.2 million. Analysts had modeled EPS of 62 cents and revenue of $569 million. The beat included a 6-cent tax benefit. Akamai bought back $100 million in its own stock, lowering share count and boosting EPS. Even with Wednesday’s gain, Akamai stock is down 7% in 2016. The stock had plunged 47% through Tuesday’s market close since Oct. 27, when the company gave disappointing December-quarter guidance. For the current quarter, Akamai forecasts revenue of $562 million at the midpoint of its range, with adjusted EPS of 61 cents to 64 cents, vs. consensus estimates of $568 million and 63 cents. Full-year 2015 revenue rose 12% to $2.2 billion. On the company’s earnings conference call, management backed off of its 2020 revenue goal of $5 billion, said Colby Synesael, an analyst at Cowen & Co., in a research note. Akamai’s technology speeds up video streaming to mobile devices, e-commerce transactions and business software downloads. Akamai has expanded into higher-margin cloud-infrastructure services and security, aiming to offset price cuts in the CDN business that average 15% to 20% a year. “The security segment, now at a $300 million (annual revenue) run rate, provided the (Q4) upside,” said UBS analyst Steven Milunovich in a report. Akamai’s stock has been pressured as some big customers shift to their own internal CDNs. Apple ( AAPL ), believed to be Akamai’s biggest customer, and Facebook ( FB ) have been moving data traffic to their own CDNs. Akamai has renegotiated contracts and lowered prices in some cases, says Tim Horan, an analyst at Oppenheimer. “The top two customers (likely Apple/Facebook) represented an average of 13% of revenue and likely closer to 11% in Q4, but that should decrease to 6% by mid-2016,” wrote Horan in a report. “The next two (likely Microsoft ( MSFT )/Google) likely represent 5% and have likely re-priced. This should result in less revenue volatility in the second half of 2016, with upside if overall traffic volumes pick up.” Google is the main business of Alphabet ( GOOGL ). He says Akamai could gain from video streaming tied to the Olympics this summer, the presidential election and National Football League games. Aside from longtime rivals Level 3 Communications ( LVLT ) and Limelight Networks ( LLNW ), Akamai is facing increased competition from Amazon Web Services, part of Amazon.com ( AMZN ), as well as Verizon Communications ( VZ ).

Biotech ETFs Slide As Stocks Report Mixed Q4 Results

Since the beginning of the year, the biotech sector has been experiencing some weakness due to industry specific headwinds like pricing concerns and global factors like weak emerging market currencies and a strong U.S. dollar. To deepen its woes, the sector has failed to gain investor confidence so far in the fourth quarter earnings season. Although several well-known biotech industry players like Amgen Inc. (NASDAQ: AMGN ), Biogen (NASDAQ: BIIB ) and Gilead (NASDAQ: GILD ) easily managed to beat estimates on both earnings and revenues, other companies including Alexion Pharmaceuticals (NASDAQ: ALXN ) and Celgene Corporation (NASDAQ: CELG ) reported disappointing or mixed results. Quite expectedly, investors will keep an eye on biotech earnings for the rest of this season to assess whether the sector can pull off another turnaround supported by strong pipelines, innovative treatments, growing demand for drugs, especially for rare-to-treat diseases, an aging population and increased health care spending (read: What Lies Ahead for Biotech ETFs in 2016? ). Biotech Earnings in Detail Gilead reported impressive fourth-quarter results as both earnings and revenues outdid the respective Zacks Consensus Estimate. The biotech giant’s fourth-quarter earnings (including stock-based compensation expenses) of $3.27 per share beat the Zacks Consensus Estimate of $2.91. Reported earnings were significantly higher than the year-ago figure of $2.38 per share. Quarterly revenues surged 16.3% to $8.5 billion driven by strong product sales. The revenue figure breezed past the Zacks Consensus Estimate of $8.1 billion. Meanwhile, the company provided 2016 product sales guidance. The company expects product sales in the range of $30-$31 billion. The stock has added 2.9% since reporting earnings (as of February 5, 2016). Another biotech behemoth, Amgen also beat both earnings and revenue estimates in the fourth quarter. The company’s fourth-quarter 2015 earnings of $2.61 per share surpassed the Zacks Consensus Estimate of $2.27 and improved from the year-ago earnings of $2.16. Also, total revenues grew 4% to $5.536 billion, which beat the Zacks Consensus Estimate of $5.532 billion. Foreign exchange translation negatively impacted fourth quarter sales by two percentage points. Based on an improved revenue outlook, the company upgraded its outlook for 2016 earnings to $10.60-$11.00 per share from $10.35-$10.75 per share. The company also pushed up its revenue guidance to $22.0-$22.5 billion from $21.7-$22.3 billion. The stock has lost 2.2% since releasing earnings (as of February 5, 2016). Biogen also beat on earnings and revenues. The company’s earnings per share of $4.50 were well above the Zacks Consensus Estimate of $4.07. Earnings grew about 10% year over year while revenues increased 7.5%. Revenues came in at $2.8 billion, beating the Zacks Consensus Estimate of $2.7 billion. This biotech firm also provided revenue and earnings guidance for 2016. The company expects to earn $18.30-$18.60 per share on revenues of $11.1-$11.3 billion. The stock gained 1.5% since it reported earnings (as of February 5, 2016). On the other hand, Celgene reported mixed results with earnings of $1.00 per share (including stock-based compensation expenses) falling short of the Zacks Consensus Estimate of $1.02 and revenues of $2.6 billion beating the Zacks Consensus Estimate slightly. However, both earnings and revenues rose year on year in the reported quarter. Net sales of the drug Revlimid, the backbone of Celgene, saw a year-over-year rise of 18%. The company has kept its 2016 outlook intact. The stock is down 4.3% (as of February 5, 2016). Alexion also came up with disappointing fourth-quarter results with both earnings and revenues missing estimates. Fourth-quarter 2015 earnings (including stock-based compensation expense) of 84 cents per share missed the Zacks Consensus Estimate of 88 cents. Earnings were also below the year-ago figure of $1.14 per share. Nevertheless, Alexion’s revenues climbed 16.9% year over year in the fourth quarter to $700.1 million. Revenues, however, missed the Zacks Consensus Estimate of $706 million. Alexion has provided its outlook for 2016. The company expects adjusted earnings per share in the range of $5.00 to $5.20 on revenues of $3.05-$3.1 billion. Foreign exchange translations are expected to negatively impact revenues by $120 million and earnings by 31 cents. Shares gained 3.6% post earnings (as of February 5, 2016). ETFs in Focus Thanks to mixed results, biotech ETFs with considerable exposure to the five stocks above were all in the red in the last 10 trading sessions (as of February 5, 2016). This has put the spotlight on biotech ETFs. Below we discuss four of these ETFs having a sizeable exposure to the above stocks (see all Healthcare ETFs here ). iShares Nasdaq Biotechnology ETF (NASDAQ: IBB ) This top player in the biotech ETF space tracks the NASDAQ Biotechnology Index, holding 190 securities in the basket. Celgene, Amgen, Gilead Sciences, Biogen and Alexion are placed among the top 10 holdings with a combined exposure of about 41% in the fund. The fund has an asset base of more than $7.5 billion and trades in an average volume of nearly 2.7 million shares a day. It has an expense ratio of 0.48% and lost 11% in the above mentioned timeframe. IBB currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Market Vectors Biotech ETF (NYSEARCA: BBH ) This fund follows the Market Vectors US Listed Biotech 25 Index and holds 25 securities in its basket. Gilead Sciences (13.2%), Amgen (12.9%), Celgene (10.3%) and Biogen (6.5%) take the top four spots in the fund while Alexion (4.8%) takes the sixth place. The fund has amassed nearly $529.8 million in its asset base and trades in moderate volumes of roughly 151,000 shares a day. The product charges an annual fee of 35 bps per year and lost 10.6% in the said timeframe. It currently carries a Zacks ETF Rank #2 with a High risk outlook. PowerShares Dynamic Biotechnology & Genome Portfolio ETF (NYSEARCA: PBE ) The fund tracks the Dynamic Biotech & Genome Intellidex Index. The top 4 holdings include Amgen (6.42%), Biogen (6.4%), Alexion (5.49%) and Gilead (5.28%). Total assets of the fund are $275.5 million representing 30 holdings. The fund’s expense ratio is 0.57%. The trading volume is roughly 83,000 shares per day. The fund has lost 10.6% in the past 10 trading sessions. It currently carries a Zacks ETF Rank #3 (Hold) with a High risk outlook. First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) FBT tracks the NYSE Arca Biotechnology Index and holds 30 securities in the basket. The fund is well diversified with no stock holding more than 4.1% weight. Biogen, Amgen, Celgene and Gilead are placed among the top 10 holdings with a combined exposure of about 14.8% in the fund. Total assets of the fund are $1.8 billion. The fund’s expense ratio is 0.58. The trading volume is roughly 475,000 shares per day. It currently carries a Zacks ETF Rank #4 (Sell) with a High risk outlook. The fund has lost 14.4% in the last 10 trading sessions. Link to the original post on Zacks.com