These are tough times for the solar PV industry. SunEdison has filed for bankruptcy and China’s Yingli is struggling. And it’s these tough times that caused investors and analysts to abandon SolarCity Corp. (NASDAQ: SCTY) after the solar installer reported earnings Monday.
SolarCity posted a larger than expected adjusted loss of $2.56 per share, but the real problem was the reduced forecast for new installations for the rest of this year. The company said its full-year loss would fall in the range of $2.70 to $2.80 per share, much worse than the consensus estimate for a net loss of $2.13.
This is not what investors want to see from a growth industry. Nor, of course, do they want to see spending of the sort that drove SunEdison to seek bankruptcy protection.
SolarCity has been seeking growth, but that costs money for marketing. Even if the company grows, the pace of growth is slower because unit costs are higher. For SolarCity to beat that curse it needs to reduce its installed cost per watt. And that’s difficult when the company does not manufacture its own modules.
If investors voted with the feet on Tuesday, dragging SolarCity shares down by around 25% at one point, analysts voted by slashing price targets. Here are five cuts that were announced today:
- Baird cut its price target from $47 to $37 with a Neutral rating
- Credit Suisse slashed its price target from $62 to $38
- JP Morgan cut its price target from $29 to $25
- Raymond James sliced its price target from $60 to $50 with a Strong Buy rating
- Stifel cut its price target from $56 to $46
After the rapid collapse at SunEdison the solar industry has a real credibility problem with investors. Over the past 12 months the Nasdaq composite has lost about 3.5%. First Solar shares are down nearly 8.5%, with Sunpower down nearly 50% and SolarCity down 72%.
SolarCity stock hit an intraday low of $16.50, down nearly 27%, and traded down about 23.6% with less than an hour to go in Tuesday’s session. The stock’s 52-week range is $16.31 to $63.79 and the consensus price target is $38.44. But that doesn’t include the cuts announced on Tuesday.
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