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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.

SolarCity Torched On Q1 Guidance As Losses Expected To Deepen

SolarCity ( SCTY ) stock was torched after hours Tuesday, after the No. 1 residential installer guided to deepening Q1 losses and slower installation growth in 2016, despite CEO Lyndon Rive’s earlier pledge to curb losses by 2017. SolarCity stock was down more than 30% after the close, after the company released its Q4 earnings and gave guidance, and after falling 5.7% in Tuesday’s regular session. Shares of rival installer  Sunrun ( RUN ) also wrapped Tuesday’s regular session down 7% and were down another 6% after hours. Big solar companies  SunPower ( SPWR ) and First Solar ( FSLR ) were down 6% and more than 2%, respectively, after hours. For Q4, SolarCity reported $115.5 million in sales, up 61% year over year, and a per-share loss ex items of $2.37, widening from a $1.33 per-share loss in the year-earlier quarter. Both measures beat Wall Street expectations for $105.6 million and $2.59, as well as SolarCity’s three-months-ago outlook for $100 million to $108 million and $2.60 to $2.75 losses. During Q4, SolarCity installed 272 megawatts, which was up 54% vs. the year-earlier quarter but missed the company’s earlier guidance for 280 MW to 300 MW. SolarCity ended the year with $399.6 million in sales, $7.91 losses per share minus items and 870 MW installed. The consensus of 18 analysts polled by Thompson Reuters saw $389.7 million and $8.03. Installations for the year came in below prior guidance for 878 MW to 898 MW, up 73% from 2014. Current-quarter guidance for $2.55 to $2.65 losses per share ex items would deepen from $2.36 in the year-earlier quarter and would miss analyst expectations for $2.36. SolarCity didn’t offer a Q1 sales view. The consensus modeled $113 million, which would be up 57%. Shortening Cash Conversion Cycle SolarCity’s Q1 180 MW installation guide would be up 18% year over year. For the year, it expects installations of 1.25 gigawatts, up 44%, as the extended Investment Tax Credit (ITC) on solar provides more growth tailwinds. The ITC extension will lead to “good growth in 2017 and beyond,” Rive told analysts during the company’s earnings conference call late Tuessday. But SolarCity shifted its focus in Q3 to becoming cash flow positive, sacrificing its typical 80% annual installation growth rate. Rive reiterated SolarCity’s 40% growth target for 2016 despite the low 18% growth forecast for Q1. Part of that process is shortening SolarCity’s cash conversion cycle, Rive told analysts. As a result, commercial installations will be back-end loaded. “While the ultimate result will be shorter time from the start of construction to operation and thus higher cash generation, the initial impact is lower installations in the first period implemented,” according to SolarCity’s letter to shareholders. Nevada Policies Nick Q1 Installations Nevada’s decision to slash net-metering payments to solar customers also impacted Q4 installations and Q1 guidance, Rive said. During Q4, Nevada contributed 23 MW in installations and typically accounts for 20 MW per quarter. By year’s end, Rive expects Nevadans to overturn the Public Utility Commission’s late-December decision. “Homeowners in Nevada want solar, they want the freedom to choose where their energy comes from, and I think this is going to be overturned by the public, by ballot referendum by the end of the year,” he said. Solar has thrived on other policy fronts. As the Nevada battle waged, California regulators opted to continue paying solar customers for energy fed back into the grid. And in December, more than 190 countries pledged to curb carbon emissions during a climate change summit in Paris. “The majority of this (climate change agreement) is going to be on renewable energy, which is going to be solar,” Rive told analysts. Tesla Motors ( TSLA ) CEO Elon Musk is SolarCity’s chairman. Tesla is due to report earnings late Wednesday. Tesla stock rallied to close up 0.2% after falling intraday to a two-year low.  

Tesla Partner SolarEdge Smashes Q2 Sales, EPS Views; Guides Q3 Up

SolarEdge ( SEDG ) stock rocketed late Wednesday after the Tesla Motors ( TSLA ) partner reported fiscal Q2 sales and earnings that smashed Wall Street expectations, while guiding to Q3 estimates also well above the consensus model. In after-hours trading, SolarEdge stock lit up more than 12%. Shares rose 2.7%, to 27.43 in the regular session in the stock market today . For its fiscal Q2 ended Dec. 31, SolarEdge reported a record $124.8 million in sales and 44 cents earnings per share ex items, up 70% and 267%, respectively, vs. the year-earlier quarter. The consensus of 10 analysts polled by Thomson Reuters had predicted $119.5 million and 36 cents, with the former in line with SolarEdge’s earlier guidance for $118 million-$121 million. SolarEdge doesn’t give EPS guidance. Current-quarter guidance for $121 million-$125 million in sales easily topped analyst views for $117.3 million. On a year-over-year basis, sales would be up 42% at the midpoint of guidance. The consensus had also modeled 35 cents EPS ex items. SolarEdge made its IPO last March, pricing shares at 18. The stock flew 139% to a record high of 43 on June 22, but SolarEdge stock encountered the same valley that plagued other solar stocks in 2015, closing the year up 56.5%. In January, SolarEdge topped Needham analyst Y. Edwin Mok’s list of solar firms for 2016 . Congress’ last-minute extension to the Investment Tax Credit (ITC) on solar freed SolarEdge from having to lower component prices in 2016. Mok now sees a mid-40% growth runway for SolarEdge in 2016. SolarEdge founder and CEO Guy Sella credited a bright strategy and business plan for the company’s Q2 success. “In addition to our revenue growth and increased profitability, this quarter we installed our first HD-wave inverter units, and we commenced shipments of our StorEdge solution,” he said in a statement. SolarEdge stock tops the 22-company IBD Energy-Solar industry group with a 97 Composite Rating out of a best-possible 99. First Solar ( FSLR ) and JA Solar ( JASO ) stocks trail with CRs of 95 and 90, respectively.