Raymond James Cuts Price Target as SolarCity (SCTY) Cuts Installation Guidance
Raymond James maintained a Strong Buy rating on SolarCity (NASDAQ: SCTY), and cut the price target to $50.00 (from $60.00), following the company's 1Q earnings report. Periodic billings revenue of $84.2 million topped estimates of $80.6 million, plus there was upfront system and incentives revenue of $38.4 million. The start to 2016 bookings was slow, largely a function of the regulatory uncertainty in Massachusetts and New York. The prior full-year target of 1,250 MW is being reduced to a range of 1,000-1,100 MW.
Analyst Pavel Molchanov commented, "In February, after a 4Q headline miss amid an unforgiving market, SCTY shares briefly traded below net present value – prompting our upgrade to Strong Buy. Hyperchoppy investor sentiment – across the entire solar space, but especially SolarCity – has been non-stop since then, reflecting some substantive issues (e.g., net metering policy news) but also extraneous events such as the SunEdison bankruptcy. While 1Q results were solid, the haircut in full-year MW guidance is disappointing, hence the stock’s fall back below NPV. More consistent execution (read: no more cuts!) is essential to achieve multiple expansion. Still, the big picture remains intact: SolarCity's dominant position as the largest player in U.S. residential solar, and its pioneering role in financing innovations, provide leverage to a major long-term theme in clean tech: the inexorable rise of distributed generation. While being cognizant of the valuation complexity and regulatory risks, we reiterate our Strong Buy rating."
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Shares of SolarCity closed at $22.51 yesterday.