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Sacked Nevada operations smashed Sunrun ‘s ( RUN ) chances of scooping up some SolarCity ( SCTY ) market share, a Credit Suisse analyst said Friday after Sunrun’s late-Thursday 2016 solar-deployment guidance lagged expectations by half. For 2016, Sunrun sees 40% growth in solar installations vs. Credit Suisse views for 78%, analyst Patrick Jobin wrote in a research report. It’s a rather “draconian scenario, considering the (Investment Tax Credit) has been de facto extended through 2023 and most net-metering decisions are in favor of rooftop solar.” Sunrun stock was torched, down 14% in early afternoon trading on the stock market today to just above 6, on the installer’s mixed Q4 earnings results. IBD’s 22-company Energy-Solar industry group felt some heat, trading flat Friday afternoon despite an up day for the market overall. SolarCity stock was down 1.2%. Late Thursday, Sunrun reported $99.6 million and a 15-cent loss per share for Q4. Sales rose 66%, and losses shrunk vs. the year-earlier quarter. Sales missed estimates, but the bottom line beat the consensus view of seven analysts polled by Thomson Reuters. For 2015, Sunrun reported $304.6 million sales, up 53%, and a per-share loss of 96 cents, narrowing from a $1.54 per-share loss in 2014. Both measures topped Wall Street’s model for $302.8 million and $2.39 a share in losses. In Q4, Sunrun deployed 68 megawatts and booked 80 MW, up 83% and 117%, respectively, vs. the year-earlier quarter. Sunrun wrapped up 2015 with 203 MW deployed and 274 MW booked, up a respective 76% and 85%. But Nevada affected both metrics, Sunrun noted. Sunrun’s Q4 deployed metric missed Jobin’s expectations for 80 MW. Current-quarter and 2016 guidance for 56 MW and 285 MW were also disappointing, Jobin wrote. Nevada Gouges Sunrun, Too Sunrun and SolarCity stocks are down a respective 52% and 55% from their closing prices of Dec. 21, the day rumors began swirling of a potential extension to the ITC. Without an extension of that key solar subsidy, analysts expected a cliff for 2017 installations following its expiration Dec. 31, 2016. Congress extended the ITC, boosting solar shares, but then a decision a few days later in Nevada gouged solar stocks. Nevada regulators opted to cut payments to solar customers for excess energy fed back into the grid. Net-metering policies are typically seen as anti-utility because they force the companies to buy the energy on a one-to-one basis. In December, both Sunrun and SolarCity opted to exit Nevada, which has been a top solar state. In February, Nevada regulators voted against grandfathering existing solar customers under the old net-metering scheme, prompting Sunrun to sue. Wall Street “under-appreciated how quickly Nevada had (grown) when we attempted to assess risks to volumes,” Jobin wrote. A recent GTM Research report says Nevada was among six states to surpass 1 gigawatt in cumulative installations. But the Nevada Public Utilities Commission decision to cut net-metering payments will move Nevada from No. 5 in installations to No. 31 in 2016, GTM predicted. In 2015, Sunrun deployed 203 MW, slightly below its guidance for 205 MW, “primarily due to the closure of the Nevada market,” according to Sunrun. Current-quarter guidance for 58 MW deployed, up 53% year over year, was below Jobin’s expectations for 70 MW. Sunrun said it removed a 12 MW backlog from Nevada. For 2016, Sunrun guided to 40% year-over-year growth to 285 MW, below Jobin’s view for 78% growth (361 MW). Last month, SolarCity blamed Nevada after it came 8 megawatts short of its Q4 installation guidance. Nevada represented about 20 MW per quarter for the No. 1 residential installer. SolarCity Chairman Elon Musk also heads up Tesla Motors ( TSLA ), which operates a battery factory in Nevada. Squaring Off Against SolarCity As recently as Q3, Sunrun expected to gain share in 2016 vs. SolarCity and didn’t foresee dropping off from 2015’s 76% growth rate, Jobin wrote. In Q3, SolarCity pledged to curb growing losses by shrinking its annual 80% growth rate. SolarCity expects to grow 44% in 2016. “We believe (Sunrun) management’s credibility will suffer until the decisions made are demonstrated to be sound and the company is able to reestablish a track record of meeting guidance and expectations,” Jobin wrote. Likewise, Sunrun is angling to become cash flow positive and expects to do so this quarter by drawing down on its $250 million credit facility. Sunrun’s 40% growth target for 2016 will allow it to preserve capital resources, Jobin wrote. The solar industry is capital-intensive, and analysts worry about SolarCity and Sunrun’s narrowing access to capital, given the market’s volatility. To that end, Sunrun is pruning its channel partners to focus on those with the highest value, he wrote. “It is apparent that a portion of channel partners are less viable for Sunrun in a capital-constrained environment, particularly those who demand advance payments from Sunrun upon customer origin instead of installation,” Jobin said. Shifting from channel partners also allowed Sunrun to plump its direct business — currently 50% of sales. In 2016, Sunrun expects to double its direct business. Combined with 40% growth overall, that shows marked deceleration in the channel business, Jobin wrote. Jobin maintained his outperform rating but cut his price target on Sunrun stock to 21 from 35. Image provided by Shutterstock . Scalper1 News
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