The big solar companies have reported earnings and investors are wondering if there will be continued strength as these companies go forward. Solar stocks are in the process of recovering to their previous highs after having been sold off. Merrill Lynch’s team that covers solar companies has a positive view on both Vivint Solar Inc. (NYSE: VSLR) and SolarCity Corp. (NASDAQ: SCTY) for what is to come.

Merrill Lynch’s Krish Sankar and Andrew Hughes reiterated a Buy for Vivint and maintained a Buy rating on SolarCity. 24/7 Wall St. has highlighted why Merrill Lynch sees room for both Vivint and SolarCity to grow simultaneously.

First of all, Vivint reported first-quarter revenue of $9.5 million, above both Wall Street expectations of $8.4 million and Merrill Lynch’s forecast of $8.2 million. The company installed 46 megawatts (MW) of residential solar systems in the quarter, ahead of the brokerage firm’s 40 MW forecast and even management’s target of 41 MW at the midpoint of guidance, which helped drive revenue upside.

Total retained value per watt declined sequentially to $2.05 from $2.11, and incremental retained value per watt increased to $1.75 from $1.65, suggesting an improved pricing mix that likely supported revenue as well.

As a result, Merrill Lynch reiterated a Buy rating for Vivint and cut the price objective to $23 from $24.

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Looking forward, Vivint had soft guidance but still maintained its installation target for the 2015 full year. The firm detailed in its report:

Vivint needs to ramp second half of 2015 installations in order to meet its 2015 target of 300 MW and continue driving the stock’s strong year to date performance (+62.4%). The good news is that a 266 MW tax equity runway and sizeable undrawn aggregation balance means the company has adequate financing capacity to support its full year target.

The increase in headcount this quarter on both the sales and installation businesses is promising, but we note substantial hiring activity needs to continue in order to install 300 MW. Our OpEx forecast moves higher as a result, which pulls down the DCF component of our valuation.

Merrill Lynch described its investment thesis this way:

Our Buy rating on Vivint Solar is based on our assessment of the company’s future cash flow generation, and the net present value of its customer contracts. As solar systems owned by Vivint increases, the future stream of cash flows improves accordingly. Although long in duration, we view those cash flows as low risk electricity payments that represent a reduction in the operating cost of customer premises.

Shares of Vivint Solar closed Thursday down 1.9%, at $14.15 on a 52-week trading range of $7.42 to $18.71. The stock has a consensus analyst price target of $19.83.

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SolarCity reported its first-quarter revenue as $68 million, which was well above Wall Street or Merrill Lynch estimates of $58 million and $57 million, respectively. Installations and bookings were 153 MW and 237 MW, respectively, which were above the brokerage firm’s estimates of 145 MW and 232 MW.

The second-quarter guidance was softer than expected on both revenue and installations, but the 2015 deployment guidance of 960 MW at the midpoint was unchanged.

Merrill Lynch maintained its Buy rating for SolarCity and reiterated its $95 price objective.

In the report, Merrill Lynch said:

On Monday evening, SolarCity announced a $500 million aggregation facility it estimates can finance the installation of over 500 MW of rooftop systems. Our prior analysis estimates that SolarCity would have to finance on average roughly $1/watt of leased system installation cost not covered by tax equity investment in 2015 and 2016 through a combination of aggregation, securitization, and cash on the balance sheet ($447 million as of the first quarter of 2015).

The flexibility afforded to SolarCity by this newest loan facility addresses cash consumption constraints imposed by prior financing arrangements by enabling drawdown shortly after installation, a concern raised on the fourth quarter of 2014 call. Although first quarter lease deployments require financing above our longer-term estimates, we expect as cost continues to decline year over year the financing requirements on a per watt basis would fall more in-line with our forecasts.

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The total installed cost dropped more than 9% year over year in this quarter, about the same rate as it did in fourth quarter of 2014. According to Merrill Lynch, SolarCity remains the industry cost leader, which in its view is a key factor for both customer acquisition and shareholder value creation. This is at the same time when the U.S. solar market will be confronting asymmetrical policy change on both a state and federal level over the coming two years.

Finally the brokerage firm described its valuation of SolarCity:

Our valuation is based on a discounted projection of future cash flows, as well as a multiple on retained value. In addition to traditional free cash, we consider the investment required to purchase solar arrays, and net investment fund flows required to finance those system purchases. We employ a 14% cost of capital, and calculate terminal value based on the average of a 3% terminal growth rate and a 7x terminal EBITDA multiple. This approach yield $101.

Shares of Solar City closed Thursday up 1.7% to $62.72, in a 52-week trading range of $45.91 to $79.40. The consensus analyst price target is $81.42.

Again, solar shares have already recovered sharply from their lows. They are also still way down from their highs. Investors should also keep in mind that Merrill Lynch is above-consensus on SolarCity and on Vivint.

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