SolarCity (SCTY)

[electracity]

.......
People used to get rich drilling for oil, they will now get rich by financing future renewable energy production. Is that not an immutable fact? How does that equate to an adverse environment?

Focus people!

That's a "horribull" analogy. With solar, people can get a small loan and have their own inexpensive supply of "oil" from their own property.

Oil exploration and refining was the opposite of inexpensive, decentralized energy. Oil was/is a capital intensive gamble. SCTY and similar are entirely unnecessary intermediaries that an efficient market will mostly remove.

 

[dalalsid]

I see you haven't at least lost some humor. Remember what I wrote on Aug 3, 2015 when you recommended buying SCTY (your SA article entitled: "Solarcity: Misunderstood And Undervalued ") near the 52W-high?

Here's my critical comment again, posted in your article's comment section:



and below that I wrote in another comment on the same day:



to which you replied:



Do you have any advice for people following you into this trade near the 52W-high back in early August 2015?

How is that $100 PT working given the current price near $24? Do you reiterate it? Did/Do you buy more SCTY?

I also wrote this: My Massive Bet On Renewable Energy | Seeking Alpha - and it looks like there is no rational reason for solar stocks to move up or down. Just look at CSIQ. So the whole renewable energy thing is not working out for me at all. On the other hand, neither are fossil fuels with Kinder Morgan down 50%. So all in all, this year I'm miserable (even in my non energy related investments). Should have stuck to buy Tesla on dips below 200. Yes I bought more SCTY options when it was at ~40.

 

[electracity]

I also wrote this: My Massive Bet On Renewable Energy | Seeking Alpha - and it looks like there is no rational reason for solar stocks to move up or down. Just look at CSIQ. So the whole renewable energy thing is not working out for me at all. On the other hand, neither are fossil fuels with Kinder Morgan down 50%. So all in all, this year I'm miserable (even in my non energy related investments). Should have stuck to buy Tesla on dips below 200. Yes I bought more SCTY options when it was at ~40.

I'm not sure why anyone is long in stocks without significant IP or barriers to entry. Why not just invest in a gravel pit operation.

 

[Foghat]

I guess I'm the only long term investor here. People are going way too short term paranoid it seems on the thread.

The facts are extremely clear: 9 billion in contracts with average fico score of 740. 99.4% of all payments paid to Solarcity since the founding of the company. That's 9 years, including during the great recession in 2008. I think that's better then ivory soap.

To say that they are any risk of not receiving those payments over the course of the remainder of the contracts is a little paranoid and emotionally clouded to say the least.

Im for one not happy with the way management played the guidance game this quarter... However, I think a little strategy was used in why they did it the way they did it. The past two years was to front load or maximize the company scale to prepare for the ITC as well as worse case net metering outcomes. Energy storage + solar at scale and price is the end game since this ultimately be where the grid ends up. It is painfully obvious. It's like having an old plasma tv with expensive cable, then buying an Apple TV and now having a connected tv with voice activated commands and a wii/PlayStation with tv channels on demand to complete the cord cutting experience. TV is no longer the same tv. The entire cable business has to change as well as many others as a result. This is not a fad, it is the new normal. So is solar+ storage and its relationship to the grid and the rate base. You can't put the toothpaste back in the tube. This is going to happen. Period. Solarcity is by far the leader in solar+storage development and implimentation with an aggregation pilot with utilities already in progress. Why do some here avoid the fact that this is happening? Why are some avoiding the fact that this has a profound bottom line impact that is well beyond any ITC or net metering events happening today? We're not taking about 20 years from now, this is happening within the next two years and grow well beyond that. If you consider yourself a long term investor, why are some crying the world is ending all of the sudden, when this medium/long term fundamental business tech and model is firmly intact?

The other thing people have to understand is the grid is not owned. It is allowed by our government. We as a country do not want a bunch of wires to fill our communities so we allow legal monopolies to occur in the absence of a competitive market in this area. Net metering is an exchange of value we as a community see it already as valuable to our grid. So did every utility that has signed on to do it. The necessary discussion of that true financial value is finally coming to happen. What is ironic is that utiltiies arguing it's a cost will only shine light on their own books and the overwhelming consensus (thus far) is that net metering is a greater then retail value to the grid. These are independent studies, not sponsored by either side. The facts have yet to play out in commissions and we will see those start to come. Even if commissions try to circumvent due process and objective evaluation, such as in Arizona and a few others, the legal system will not.

I am extrapolating broadly because many supposed long term investors are willfully or not willfully ignoring the true business outlook for Solarcity and the real numbers behind it.

Solarcity has stated from day one on the public market they know he ITC expiration is coming and they will be working on every level to cut costs and innovate in order to thrive in post ITC world. It you actually listen to management, they are thinking many steps ahead, they are planning many steps ahead. Look at every strategic move they've made and it has been spot on from energy storage to silveo to buying zep and paramount solar... every big picture move exactly right.

To me, it sounds like some posters here watch a lot of CNBC clips and literally rehash it here as their own analysis. Not everyone, but some seem to be just parroting whatever paid talking heads say on a daily basis here.

again, either weather the storm or get to the sidelines, but don't try to spin the story cause you're upset with the stock price right now.

 

[TheTalkingMule]

That's a "horribull" analogy. With solar, people can get a small loan and have their own inexpensive supply of "oil" from their own property.

Oil exploration and refining was the opposite of inexpensive, decentralized energy. Oil was/is a capital intensive gamble. SCTY and similar are entirely unnecessary intermediaries that an efficient market will mostly remove.

I wasn't making an analogy, I was saying that we've passed a turning point. For the last 100 years it's been advantageous to hoard oil and sell it at a premium, now that renewables are proven to be the better option there's not going to be anything to hoard. Therefore people won't be making money hoarding oil anymore and the best option for monied interests is to finance the purchase of the technologies that allow for power production. I think we can all agree on that, no?

The idea that major banks won't flock to 740 credit score borrowers with a 99.4% repayment rate is just laughable.

 

[gene]

@Foghat, I am long with you. Holding 5,000 shares.

There is a Town Hall investors presentation Thursday (tomorrow) at 6 PM. But I am not finding a link. Anyone know what the link to a feed will be?

 

[dalalsid]

I'm not sure why anyone is long in stocks without significant IP or barriers to entry. Why not just invest in a gravel pit operation.

Have some tickers?

 

[jhm]

Why the Energy Sector Could See More Defaulters - Market Realist

This helps to provide context. Lender are tightening up credit in the energy sector. Oil and gas producers have become over leveraged to continue operation. So defaults are on the way. This very well could be impacting renewable energy bonds as the market tends to lump all energy into one market.

The upshot here is that O&G will slow new well development and restructure. This can allow prices to stablize. As that happens, renewables continue to grow and take share of the energy market. In time investor will sort out who the winners and losers are.

- - - Updated - - -

I'm not sure why anyone is long in stocks without significant IP or barriers to entry. Why not just invest in a gravel pit operation.

You mean like tar sands?

 

[electracity]

I wasn't making an analogy, I was saying that we've passed a turning point. For the last 100 years it's been advantageous to hoard oil and sell it at a premium, now that renewables are proven to be the better option there's not going to be anything to hoard. Therefore people won't be making money hoarding oil anymore and the best option for monied interests is to finance the purchase of the technologies that allow for power production. I think we can all agree on that, no?

The idea that major banks won't flock to 740 credit score borrowers with a 99.4% repayment rate is just laughable.

There is no shortage of finance for solar. Solarcity is filling the rent-to-own and payday loan niche. They were able to sell a high margin product to high FICO customers due to an immature market.

"Increasing customer acquisition cost" in a booming solar market is a euphemism for "customers are catching on to our low value offering".

 

[Foghat]

Why the Energy Sector Could See More Defaulters - Market Realist

This helps to provide context. Lender are tightening up credit in the energy sector. Oil and gas producers have become over leveraged to continue operation. So defaults are on the way. This very well could be impacting renewable energy bonds as the market tends to lump all energy into one market.

The upshot here is that O&G will slow new well development and restructure. This can allow prices to stablize. As that happens, renewables continue to grow and take share of the energy market. In time investor will sort out who the winners and losers are.

- - - Updated - - -



You mean like tar sands?

jhm, Solarcity has a 99.4% payment received history. When they see this fact, hard to even remotely lump Solarcity in with oil&gas or any other solar company (i.e. SUNE)

for all others, acquisition costs are directly linked to scaling/80%-100% annual compounding growth. Think a little bit here... Going from 500MW to 1Gw is a lot more acquisition cost intensive as opposed to going from 25mw to 50Mws or 100Mw to 200Mws... Just look at solarcity's install costs and you'll see this company is moving firmly in the right direction at the historic scale level currently at.

 

[electracity]

Have some tickers?

For gravel, I would suggest following an empty truck back to the quarry and talking to Ed, the owner.

For solar stocks, I wonder which are oversold because of the sins of the PPA sellers.
Anyone know how much of SEDG business is U.S.?

 

[SBenson]

The idea that major banks won't flock to 740 credit score borrowers with a 99.4% repayment rate is just laughable.

If SolarCity is not in business, who will service that debt? Who will honor customer maintenance commitments? There is some exposure to SolarCity even though they are customer payments backed. That's the extreme case.

In a simpler case:

You can NOT mortgage away 100% of the contract. If margins drop to zero, and they get financing only for 80% upfront, they can NOT do the install anymore. Think about that for a second.

Sensing that margins will drop to zero, the market can dry up even earlier because it's painfully obvious that the business is unsustainable.

And hence CA NEM 2.0 announcement is ultra crucial. Factoring in the certainty of ITC drop, CA NEM 2.0 sets the tone as to whether the business is sustainable or not.

The jury is out but that is the risk shareholders are taking. I personally couldn't take that risk.

For info, CA NEM 2.0 is expected to come out before Nov 17 as per this. It could go into affect as early as Feb/Mar 2016 in southern california. The link has details.

 

[glhs272]

Foghat, I too am also still long. However I have only 250 shares. This investment was always a gamble and paid for with money I could afford to lose. So this puts me in the position of being able to ride out the storm or drown with the sinking ship (whichever way it goes) without too much hardship. That said these very low share prices are worrying me. Could SCTY fail or be subject to a hostile take-over simply because of a super depressed share price? Seems like Solar City is in a lot of danger right now, simply based on very negative sentiment.

 

[ggies07]

I guess I'm the only long term investor here. People are going way too short term paranoid it seems on the thread.

Nope, been here since the IPO and won't go anywhere.

 

[Foghat]

Foghat, I too am also still long. However I have only 250 shares. This investment was always a gamble and paid for with money I could afford to lose. So this puts me in the position of being able to ride out the storm or drown with the sinking ship (whichever way it goes) without too much hardship. That said these very low share prices are worrying me. Could SCTY fail or be subject to a hostile take-over simply because of a super depressed share price? Seems like Solar City is in a lot of danger right now, simply based on very negative sentiment.

insiders (many also major tesla/spacex investors) own majority, hostile take over not in the cards. Do some people here not remember that Elon is the rive bros cousin? They have been working together since day one on Solarcity. Did anyone read the vanity fair article showing how the rives/masks spend extensive time together on vacation talking business and big ideas? Elon or the rives selling or allowing a hostile takeover of Solarcity is not even a low probability event. I'm just going to say it... It will never happen.

 

[SBenson]

I find it quite very shocking that over the last 35 pages since the ER, not a single person except me is looking at California and putting it up as a discussion item, while I believe it is fundamental to SolarCity's very survival.

Did I completely lose my mind? I am unable to comprehend the silence on the subject.

 

[TheTalkingMule]

If SolarCity is not in business, who will service that debt? Who will honor customer maintenance commitments? There is some exposure to SolarCity even though they are customer payments backed. That's the extreme case.

In a simpler case:

You can NOT mortgage away 100% of the contract. If margins drop to zero, and they get financing only for 80% upfront, they can NOT do the install anymore. Think about that for a second.

Sensing that margins will drop to zero, the market can dry up even earlier because it's painfully obvious that the business is unsustainable.

And hence CA NEM 2.0 announcement is ultra crucial. Factoring in the certainty of ITC drop, CA NEM 2.0 sets the tone as to whether the business is sustainable or not.

The jury is out but that is the risk shareholders are taking. I personally couldn't take that risk.

For info, CA NEM 2.0 is expected to come out before Nov 17 as per this. It could go into affect as early as Feb/Mar 2016 in southern california. The link has details.

You make a near-zero maintenance 20 year money fountain sound horrendous.

Anything can be spun negatively, I'll keep faith in the simple concept that solar is the next thing and that at least half adopters will want their hand held for the next 5-10 years. SCTY has a huge head start and will only benefit for a shakeout.

 

[Foghat]

I find it quite very shocking that over the last 35 pages since the ER, not a single person except me is looking at California and putting it up as a discussion item, while I believe it is fundamental to SolarCity's very survival.

Did I completely lose my mind? I am unable to comprehend the silence on the subject.

Advisable to read maybe the 35 pages before the ER and you'll have a better answer on California and many other net metering cases. many, many topics and issues have been discussed and analyzed in this thread. Might be a chore, but start from the beginning and you'll find an amazing amount of data to answer a vast majority of your questions.

any developments on California will come with news releases. None have come for a while so discussion hasn't advanced. But everything up to today(baring any new developments) has been covered within the history of this thread

 

[glhs272]

insiders (many also major tesla/spacex investors) own majority, hostile take over not in the cards. Do some people here not remember that Elon is the rive bros cousin? They have been working together since day one on Solarcity. Did anyone read the vanity fair article showing how the rives/masks spend extensive time together on vacation talking business and big ideas? Elon or the rives selling or allowing a hostile takeover of Solarcity is not even a low probability event. I'm just going to say it... It will never happen.

Speaking for my self... I am certainly aware of the family relationship with the Rives and the Musks. I didn't think Elon had a majority of shares. However, collectively with all the insiders making up a majority of shares then a takeover seems out of the question. I didn't read the vanity fair article. Frankly, I thought Elon didn't take any vacation. I just have been thinking of all the worst case scenarios and summing them up with the likelihood of them happening. A lot of bear arguments already in this thread so no need to re-hash.

 

[SBenson]

You can NOT mortgage away 100% of the contract. If margins drop to zero, and they get financing only for 80% upfront, they can NOT do the install anymore. Think about that for a second.

I struggled to explain why the Business model doesn't work in a post ITC, NEM world in a lot of posts with a lot of data and words. But the above sentence really gets to the very core of the problem.

The margins *need* to be healthy for this model to work.

Note: you should remove the renewal portion when computing margin for this purpose because renewal portion can not be sold or mortgaged.

A homeowner buying a system for themselves through a loan doesn't face the same issue. The homeowner can put their own money as some amount of upfront capital or use home equity. So a home owner can still install a system even if payback drops to 20 years! On the other hand SolarCity will fail miserably if payback reaches 20 years.