In my mind it's clearly a make only with almost zero chance of a break. They're planning on cash flow positive by the end of the year so planning on cash burn at previous rates is not believing in management (which I know you feel has been deceptive at times).
While they may be "locked out" of traditional capital markets they have plenty of assets to back them so it doesn't really make sense to use the traditional markets either.
I'll be excited to see how their earnings call goes. What their sales costs are and what they guide for the year. They have been radio silent about the ITC extension and I'm curious if they are still planning on cash flow positive at the end of the year or if they are transitioning back into hyper growth. I have a feeling it will still shoot for cash flow positive so they can prepare for a capital raise to finance 5 gig factory
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I think we can all agree that if they were building a stock pile of cash investors would understand the business model a lot better
Missed your second post, valuation is definitely a tricky beast with scty !
i think we have to look at the forest instead of the trees on valuation. Solarcity is cutting costs on average 12%y/y right now, with projected costs within 12 month down to 2.30/watt... and this is before full production costs savings from the riverbend factory. This reflects scale and management effectiveness to improve company productivity. this is extremely valuable in a growth company whose primary evaluation as a stock on its ability to scale and improve productivity.
Now the next piece is an differentiating innovative product. Does Solarcity have this? They have innovated in every facet of its business from financing to marketing, and mounting hardware to solar panels... But most significantly, and what I harp on also every post, is they have brought a whole new dimension to solar+energy storage by developing and now implementing aggregation capabilities of all its distributed assets in a new wholesale market thst never existed before which instantly maximizes all "stacks" of values possible in distributed energy resources. As we have not yet seen this in practice, it is easy to not include these "stacks" in our assessment of Solarcity stock value potential. However, it is fundamental to investing in Solarcity because thst is exactly where it is heading and the whole point of being an investor in a growth technology/energy company.... Where is this company going and how big is the market is that?
Now, exact financial calculations are not really possible and I understand people get caught up on this and that's fine, But, to really invest in this company you have to be willing to connect the dots and make a few projections on your own. Give it a little time to work its way there, and then reap the rewards. If you are stuck on day to day movements, then you're right... Valuation is a mystery. You have better chances throwing dice against the wall, then predicting what numbers come up on the stock ticker with scty. But if you really believe Solarcity is inevitable, then a more forest from the trees approach really makes it clear this company is extremely undervalued and a massive buy at this point in its growth trajectory.
I think we also have a little more clarity on numbers as well: The ITC will run through 2022-2024(completion has to be complete within two years of commence work). So we know that will continue to help costs dropping, tax equity growing, and give stability over the next 6+ years.
We are now seeing that grandfathering is becoming codified within any net metering changes moving forward. The two most draconian actions on grandfathering were with Nv energy in Nevada and SRP in Arizona. Both have back down from not grandfathering and both have policies of extending it for 20 years. Now as thst has become stand and prescedent with regard to net metering customers, the market can find stability securitization and rates can continue to fall and offerings can continue to grow massively as a result. As well as Solarcity can sell more systems, all a reinforcing cycle that will reflect in stsble growth projects with respect to consumer confidence in return on investment.
secondly, California this week will decide on future net metering rates thst will last over the next 3-4 years, approximately 2020. California is the single most important market in the country for stable growth for Solarcity. If all goes well Thursday, we can expect multi year projections from Solarcity in the near future, maybe not at the q4 conferenc call, but within the year. Those growth projections will have a shocking effect on the stock, which you can't expect another downturn like we've experienced over the past year. You either have to be in at this time or accept a much higher entry point because it's not going back. New York is a massive market that will establish the value of solar by 2017, that should develop a benchmark for the transition to the next faze solar+storage aggregation. Just on California and New York alone Solarcity could sustain current growth the next 3-4 years between rates cases alone. Again, adds further stability for investor value projections.
lastly, California and New York are developing the solar+storage aggregation model at an accelerated rate right now. Solarcity is proving out the model this year, and I expect we'll start seeing demand response contracts with utiltiies starting sometime within 2017-2020 timeframe. We don't have numbers yet, but it's not a far stretch to see the massive massive value this will add to Solarcity and how massive the market will be as the price for solar+storage product drops within that same time frame. The Gigafactory will be ramping toward full production by 2020 and as new net metering discussions begin happening Solarcity will already be in full transition to include ancillary grid services model as it will provide greater returns to consumers then just net metering alone. At this point I also feel many more markets within many more states will open up and solarcity's addressable US market should fastly approach 90-100mln buildings/home rooftops(in addition to micro grid/utiltiy opportunities). As it stands right now, Solarcity has projected it will maintain a 40% growth rate, so just projecting to 2020, we can estimate installs at 1.75Gw(2017), 2.45gw(2018), 3.43gw(2019), 4.8(2020). So we can project based on these numbers that Solarcity may achieve 8x current installed capacity in just 4 years time... That'd absolutely mind boggling at current stock price.... Let's all remember this is a growth stock and scty is currently at $30 with this incredible future ahead of them.
just an add, we also can see that a 5 gigawatt expansion is a necessity by 2020. In fact we could deduce that they could start building it out Piece by piece starting in 2018 and ramp steady through 2020-2021. I can also see that they may move right to 10GW factory if the solar+storage prices drop as planned by 2020. Remember the Rive brothers both projected Solarcity will over solar+storage as standard package by 2020, so I wouldn't be surprised if they don't announce a tesla Gigafactory sized factory development scaled over a 5 year period of construction much like what is happening in Nevada right now. Elon might even label it Gigafactory 2...
bottomline, valuing the company in exact numbers is difficult during these times of policy transition, but valuing the company as a whole over the next 4 years(and beyond) is very clear in my mind.
It's wildly undervalued right now and accumulate when capable. Invest long, don't expect a trade to ever work.
