SolarCity (SCTY)

[gene]

I may have missed something but we seem to always be looking at residential solar market. A friend of mine who has been in sales with SolarCity for several years was telling me that they are going after small business and medium business installs soon. I assume the ITC is only for residential? Am I correct? This guy has been saying all along that getting hardware costs down is paramount. Too me that is saying that SCTY is wanting to drive these costs low enough so that businesses can get a good return even if they do not receive ITC. And of course, battery storage for a business would help a lot. My father has a small business, about 20 employees, with a machine shop. Their electric bill is in the thousands!

 

[ggr]

I may have missed something but we seem to always be looking at residential solar market. A friend of mine who has been in sales with SolarCity for several years was telling me that they are going after small business and medium business installs soon. I assume the ITC is only for residential? Am I correct? This guy has been saying all along that getting hardware costs down is paramount. Too me that is saying that SCTY is wanting to drive these costs low enough so that businesses can get a good return even if they do not receive ITC. And of course, battery storage for a business would help a lot. My father has a small business, about 20 employees, with a machine shop. Their electric bill is in the thousands!

Just over a year ago, we tried to get Solar City to bid on a flat 8000sqft roof in the desert in El Centro, CA. They weren't interested. Now they're getting interested and this opportunity at least has passed.

 

[TheTalkingMule]

I may have missed something but we seem to always be looking at residential solar market. A friend of mine who has been in sales with SolarCity for several years was telling me that they are going after small business and medium business installs soon. I assume the ITC is only for residential? Am I correct? This guy has been saying all along that getting hardware costs down is paramount. Too me that is saying that SCTY is wanting to drive these costs low enough so that businesses can get a good return even if they do not receive ITC. And of course, battery storage for a business would help a lot. My father has a small business, about 20 employees, with a machine shop. Their electric bill is in the thousands!

I believe the tax credit is fine for business installs. The best part about commercial installs is that a much larger chunk of total production can be used right on site. Retail operations can use it for AC at peak and your father can run his machinery during the daylight working hours.

 

[gene]

Just over a year ago, we tried to get Solar City to bid on a flat 8000sqft roof in the desert in El Centro, CA. They weren't interested. Now they're getting interested and this opportunity at least has passed.

Would you have been able to receive ITC or is it residential only?

 

[SBenson]

Would you have been able to receive ITC or is it residential only?

ITC is most definitely both residential and commercial.

 

[Mike Strauss]

Looks like this is great news for Mr. Musk, especially due to recent developments (Paris talks, congress vote). The stock is up and analysts are increasingly bullish https://www.tipranks.com/stocks/scty

 

[phigment]

I was looking to buy two days ago but had to free up some funds... looks like I missed the initial bump. Anyways... still on board as of yesterday.

Looks like it's tracking oil prices today. It would be nice if they could be decoupled.

 

[TheTalkingMule]

I was looking to buy two days ago but had to free up some funds... looks like I missed the initial bump. Anyways... still on board as of yesterday.

Looks like it's tracking oil prices today. It would be nice if they could be decoupled.

For the last 4 months I've been telling people that "anything below 50" was a steal. Kind of tough when people buy at $40 on your recommendation and the stock drops to $29 the next week! I still thought $50 is outrageously under value even with the ITC stepping down to 10% and now that it's extended I'm not even sure I have a fair value in mind. Gonna have to wait for new guidance in late Jan or early Feb to set a new realistic target.

If this week's press coverage, continued short interest and human nature are any indication, you still bought way ahead of the curve yesterday. The wider public still doesn't "get it", but they will when new guidance arrives.

 

[jhm]

I don't know the exact mechanics of it. Whether they get to retroactively take credit in 2015 or if it will be in 2016 but based on 2015 credit rate. It may not be very material except for some very detailed tax management.

However, I read something even more positive a while back. Can't locate it now. Apparently project commencement can be interpreted all the way back to beginning of making of the panels. What does that even mean? Does digging up earth to find raw materials count as beginning? Does installing equipment in a factory count? In any case, these analysts were predicting that the interpretation can be applied in such a way that the ITC can be taken further out for a few extra years. So if all this is correct, the ITC doesn't go down to 10% in 2022. It happens in 2024/5. And the step downs to 26% and 22% are further out than published too.

Moreover who is to say ITC won't be extended or increased (from 26, 22 level) again.

Climate change is a market failure. The heavy government hand wants to give us boat loads of money. It pays to be on the right side of the history.

- - - Updated - - -

I get the feeling that much of the market didn't quite get to see the detail of this tax credit extension. I didn't see details spelled out in any news articles. As all the detail gets out I have a feeling that the stock continues to run up. We are way ahead of the curve here. or so it seems.

IRS will have to issue specific rules about what constitutes commencement.

Another little detail is that the 10% ITC after 2021 is for commercial and third-party owned residential. Residents that buy their own system will get nothing. Thus, big installers offering leases and PPAs have and advantage over mom & pop local installers. This seems terribly unfair, and for that reason may triggers some sort of new extension deal in 2021. I guess we'll get to debate this endlessly in about 5 years, but it seems to me that the political seeds for a second extension have already been planted. Ain't politics fun?

 

[SBenson]

IRS will have to issue specific rules about what constitutes commencement.

Another little detail is that the 10% ITC after 2021 is for commercial and third-party owned residential. Residents that buy their own system will get nothing. Thus, big installers offering leases and PPAs have and advantage over mom & pop local installers. This seems terribly unfair, and for that reason may triggers some sort of new extension deal in 2021. I guess we'll get to debate this endlessly in about 5 years, but it seems to me that the political seeds for a second extension have already been planted. Ain't politics fun?

I asked someone who is an expert in this type off stuff and got a prompt response. Lets just say the person writes intelligence reports. So I trust the source.

Apparently SolarCity lumps a bunch of residential projects together and claims credit under Commercial category. So they can lump a bunch of projects over a few different years and claim under "commence construction". So a few extra years is in the bag. A regular homeowner and mom/pop stores can't leverage this way. This is massive.

- - - Updated - - -

That actually translates to a few extra years on full 30% credit. As each leg is extended out by a few years.

 

[TheTalkingMule]

All the [small] advantages in this legislation will go toward helping utilities maintain an advantage. As such, you can expect SCTY to have a huge advantage over regular installers because they're much more like a utility. Mom and pop don't have a lobbying arm.

 

[doggusfluffy]

That makes sense. In fact, I wonder if small solar gardens will become a new corporation, collaborative effort in finance form.

So my reading for the day. Broader market is down, SCTY is up about tree-fitty and volume is just creeping to 6m shares. Shorts cannot be happy waiting this out and not getting any help on a down day, might start looking to bail in big numbers tomorrow?

 

[SBenson]

All the [small] advantages in this legislation will go toward helping utilities maintain an advantage. As such, you can expect SCTY to have a huge advantage over regular installers because they're much more like a utility. Mom and pop don't have a lobbying arm.

This is no small advantage by any means. 30% ITC for a few extra years, from a few years out, on a net basis translates to "multiple billions" of dollars of windfall to SCTY. Just do some back of envelope math, you will see. This hidden windfall is not known or well understood by the market place. At least I didn't see anyone explicitly talking about it.

For someone reading new, this hidden windfall is in addition to the published new ITC timeline. This is based on language change in the law from 'placed in service' language to 'begin construction' language.

 

[ClownMouth]

Hey guys, I don't post too much but wanted to thank TTM, SBenson, JHM and others for providing some good conversation/updates in this topic. I'd been thinking about starting a position in Solar City for a long time, but don't follow it the way I do TSLA and some of my other investments. When the price went down into the 20s recently I came close but decided I'd rather give up some upside in exchange for waiting for more on ITC. I started a position (common shares only) today, thanks in part to some of the updates in this topic. Here's hoping I didn't miss too much of the ride back up.

 

[blakegallagher]

Hey guys, I don't post too much but wanted to thank TTM, SBenson, JHM and others for providing some good conversation/updates in this topic. I'd been thinking about starting a position in Solar City for a long time, but don't follow it the way I do TSLA and some of my other investments. When the price went down into the 20s recently I came close but decided I'd rather give up some upside in exchange for waiting for more on ITC. I started a position (common shares only) today, thanks in part to some of the updates in this topic. Here's hoping I didn't miss too much of the ride back up.

Glad to have you on the long side, been trying to convince a couple of friends it is not to late.

 

[TheTalkingMule]

Some options comments for today(understanding I know nothing of options):

The most options sold seem to be $60 calls that expire tomorrow. Why would you do that?

Jan 2017 $70's are going for $7.81 and $80's at $5! Very satisfying feeling. If I have a bunch of these I just sit tight and wait for at least $100, right?

Jan 2018 $90's are a whopping $6.85. Yikes!

 

[dakh]

The most options sold seem to be $60 calls that expire tomorrow. Why would you do that? [snip]
Jan 2018 $90's are a whopping $6.85. Yikes!

Sitting on some of those I got for $2.15 $60 calls, maybe part of some popular short strategies?

 

[TheTalkingMule]

Sitting on some of those I got for $2.15 $60 calls, maybe part of some popular short strategies?

That's what I figured. Need to do some more options strategy reading now that things are getting serious.

 

[SBenson]

Adding to the ITC language change topic.

SolarCity effectively has full 30% ITC until beginning of 2024.

I will let you guys look up the Bill and figure it out

Shhh, but don't tell anyone

 

[doggusfluffy]

Am I correct that now with the ITC package fully exposed, the next single biggest factor affecting SCTY is the simple market dynamics of the short squeeze? New guidance with ITC will be the next catalyst which will come from analysts over the next days to week or two? Is this an elementary, yet still proper way to think about what is happening to the stock?