Brainchild of uber entrepreneur and superhero Elon Musk, SolarCity installs and finances commercial and residential solar energy systems. Founded in 2006, SCTY IPO’d late last year at $8 per share and currently trades at a little over $23. Investors (and taxpayers!) are STILL being burned by long running clean energy debacles – most notably Solyndra - so why am I, and judging by the $1.75 billion valuation, many others, a huge fan of this company?
SCTY benefits from advancing technology – Solar power tech is advancing so quickly now that even Chinese producers are going out of business; this is the principle reason why Solyndra no longer exists. SolarCity, however, benefits from any new developments, as lower prices only expand market potential.
SCTY doesn’t charge anything upfront – Panels are installed for free, and then electricity is sold to homeowners at a lower rate than the major utilities.
SCTY has fantastic business partnerships – Installations are marketed through Home Depot stores, discounts are offered to Honda owners, and Google, Bank of America, and Merrill Lynch back the Power Purchase Agreements.
The common argument I hear from finance professionals is that solar would not be competitive without subsidies, and they’re still right... In some places.
Deutsche Bank recently reported that solar energy has hit grid parity in India and Italy, with some American States close behind. Articles in Scientific American and The Economist show that solar follows a Moore’s Law type growth curve.
All signs point to solar energy becoming, to quote Mr. Musk, the “plurality of power” in the next 10 years. I think with their innovative financing plans, strong industry partnerships, and brilliant business model, SolarCity is well positioned to be the long-term leader in this fast growing industry.
Anyone disagree?
Elon is my idol. That is all.
I've made a very good return investing in it already. It's a leader in a sector with huge potential for growth - definitely a long term investment for me.
Huge fan of Elon. I wonder what all the WSO TSLA bears have to say.
Look at what happened at Germany, Spain with regulatory risk. Specially with renewable generation companies where tariff deficit have arousen due to the subsidies..All of these countries have suffered regulations that have cut back the payment scheme of these tipe of energy...
In regards of these company seems more than a builder so not to be directly affected if this scenario turns out to be the one.
Elon is seriously one of my favourite people in the world. Have had some money in TSLA for a while and is looking good at the moment. If and when SpaceX IPOs I'll jump straight in.
Having said that I always got the feeling that SolarCity was almost secondary to him in terms of importance behind the first two. Doesn't seem to have affected SolaryCity's performance as of late though ...
my biggest issue with solar/anything in the energy sector, is that when they crack the more advanced fusion techniques, it'll make energy near worthless. I like this idea on the short term, but i wonder how much they lose when cold fusion comes out, which it will purely from the defence research on it, let alone the energy companies.
It's a nice gamble, and you're saying its great with hindsight, which is wonderful. If a new solar panel comes out that drives costs down significantly, i'll buy it off the shelf at homebase and get them to install it, and my energy is free.
Their margin is from the significant sunk cost in investing in panels on a large scale.
I don't think energy companies are carrying out any research into fusion at the moment. The military pours money in to letting physicists have a crack but we're still decades away, if not more. I've been lectured by the CEO of Joint European Torus and even he feels that viable fusion is at least 50 years away. I guess that is still fairly short term, but not really from an investing viewpoint. Plus they've been saying that it's going to be ready in 50 years for at least 70 years now. And this is normal fusion, I haven't heard anything to suggest cold fusion is even near viability in any way at all. If it is even physical.
Wow I can't believe I didn't get shit on.
I've never been a fan of solar energy. Solar and pharma are two of the stocks I tend to stay away from, as well as a majority of technology startups. I am, however, looking into some of the companies that produce the solar panels and parts for the panels since they do more than just solar to add some diversification in case a solar company goes under, which is always a possibility. I prefer nat gas. Even though I think the price is high right now, I think that it's a good compromise between the drill baby drill mindset and the occupy mindset.
I work in solar...
SCTY has got it good in that they've established lease funds with other banks/investors to finance the initial construction of solar sites. They also have their internal construction teams and can manage the quality of their services whereas other developers have to rely on third party EPCs and are slower when it comes to the permitting/construction process. But they also have higher overhead and have a lot more employees on their payroll.
However all the chinese manufacturers are in the shitter right now and are crushed by debt. I think Trina Solar hasn't been profitable in the last 6 quarters and the largest one Suntech Holdings just went bankrupt. The vast majority of their sales and project investment efforts are still focused on Europe and the US market is still tiny in comparison. The reason is because Europe offers a lot higher incentives and tariffs and the projects there offer IRRs of 12-14% whereas the ones in the states only offers 7-9%. Unfortunately Europe just slapped a 46% tariff on Chinese modules and a lot of manufacturers are going to go bankrupt in the next couple of years. The CEO of Trina Solar, one of the larger ones, said that he only says 4 or 5 players in the china market five years from now. Right now there are hundreds of small manufacturers copying one another because each province wanted to promote their own provincial champions and get rich quick by providing a lot of incentives.
The main issue is that when manufacturers go bankrupt then the developers like SCTY are liable for the 20-25 year warranties. This is the big issue that is hanging in the air. Sure the modules have all been tested and supposedly guaranteed to last for that long but the industry itself has only been around for a short period of time....
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