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TheTalkingMule
Distributed Energy Enthusiast
Nothing really changed from last quarter's call, if anything it was much more boring than expected. ~$1B in revenue added to the books, growth costs high, sales low, but on track for 1.25GW in 2016. Price increases have been known for some time, it's part of going cash-positive in 2016. No surprises other than 1Q guidance, but 2016 as a whole remains unchanged.
People will dig deeper and discuss as they have a chance to rip into things deeper. It's 10am the day after, folks west of Reno may still be asleep.
What do you think needs to be discussed? You are one of the guys after all, no?
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Here's a fairly decent early analysis.
Beyond Revenue and Profits: The Most Important Things From SolarCity Corp. Results
TheTalkingMule
Distributed Energy Enthusiast
After doing my reading and thinking this morning I'm in no rush to buy. Whatever shares I want will be purchased today or at some point over the next quarter around the 18-25 level. Options might as well wait until May/June because the next call will have the similar revenue and just as much cost. We'll probably do the drift up/crash down cycle all over again.
Once this thing goes cash-flow positive though......look the hell out. The models all these computers are using to gauge value will flip upside down and recognize BILLIONS that were being overshadowed/discounted by what was considered an unsustainable cost structure. Think of those numbers in a cash-flow positive algorithm when we top 800MW installed through 3Q.
If Buffalo weren't delayed I'd say buy 2017s in April and try to time it for a run-up that peaks in Nov/Dec, but it's hard to tell if gigafactory's even being considered in price right now. I don't think it is.
Confusing times, but fortunately the weak 1Q guidance SHOULD buy us a chunk of time to work this out and still get this price point. Things are starting to become clearer to me. We're basically going to have a hybrid of the post-ITC strategy, but with the 30% ITC still in the equation. Cash-flow positive, but with wind at our backs rather than having to drastically cut cost.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
It's 95% macro. The way I see it is SCTY's Business edge is to be a solar financing company. In this macro environment they're getting heavily punished because of their dependence on capital and access to the credit markets. The market is pricing in severely reduced access to capital, at least cheap capital. All IMHO.
The Blue Owl
Endangerous Herbivore
The political environment in the U.S. is adding to the gloom, too:
Supreme Court Puts EPA Carbon Rule on Hold During Litigation (this is the WSJ; use incognito mode or search the title on Google to avoid the paywall.)
jhm
Well-Known Member
Yeah, I think cash flow positive will be the transformative event for the stock. So with that in mind, I think that as an investor I want to watch for progress in that direction. Certainly, cost per Watt is a key metric, but growth in MW installed is not so important.
I'm quite pleased with the progress driving total cost down to $2.71/W. I'd like to see this drop below $2.50/W by Q2. So installed cost is already excellent at $1.90/W. Perhaps this can drop to $1.85/W by Q2. G&A was a little high at $0.25/W. Perhaps this can drop back to its historic low of $0.20/W. So together that's a savings of $0.10/W by Q2, so what remains is to cut another $0.21/W out of marketing. I was a bit disappointed that marketing came in at $0.56/W, but this is really a big improvement from Q3 at $0.64/W. So I'm delighted with the progress, but can SolarCity squeeze this down to $0.35/W by Q2. I suspect this is largely what the Q1 guidance is about. Marketing spend is a key driver of the pace of growth. Can any solar installer grow at 40% annually while only spending $0.35/W on marketing and sales? That's what we need to find out, and cutting cost in marketing can easily put growth targets at risk. Hence, 180 MW guidance gives marketing and sales a little room to figure out how to market at lower cost. So if they can pull this off, we could see $2.50/W in Q2. I think this would go quite far to help achieve positive cash flow by Q4.
So we should probably have a vigorous discussion here about what all is required to get to positive cash flow. It's also not clear to me how ABS financing fits into that. We need to get a clear picture of what positive cashflow would look like. I am quite sure nevertheless that lowering the cost per Watt is an essential part of getting there, even if I'm not sure what the destination looks like.
TheTalkingMule
Distributed Energy Enthusiast
Exactly, and they're 100% correct to be concerned about a model that in it's current state looks to be burning through cash. People need to understand where all these costs are going and what they will look like in the coming quarters/years. SCTY is financing more than 100% of install cost right now due I assume to the flexibility afforded by the ITC credit. That's a wonderful step toward cash-flow positive.
Do the same exercise we've been doing in past quarters, pretend this company stopped trying to grow today or more accurately imagine they didn't need to pay to grow. They booked something like $600M+ in actual total contract revenue in 4Q, the cost to get that revenue was supremely high. $.64/W for marketing/sales is more than the panels cost! The key is to remember that is simply the cost of expanding the business nationwide today, down the line that cost will shrink to zero as it has in Germany. If my aunt has SCTY and loves it, why would I pay a sales team $3k to sign me up? I won't, I'll sign up online and get a lower rate. That's the next phase, who knows when it starts.
So imagine you have a company that booked $600M+ in a quarter, paid off the same costs minus all the mess of sales and expansion. That is a monster. There is no advantage at scale today, but when they get settled and the market gets to scale........they can't be touched. It's remains all about when that can happen.
These algorithms are perfectly logically discounting nearly all current and future revenue and individual investors need to decide whether solar will get to scale soon or not. If so.......zoom, if not......
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All along I thought people would look to installed MW, costs, marketshare, and be able to eventually connect the dots. I thought the massive downswings were shorts spreading FUD and irrational projections. That's not it, it's bots taking the perfectly rational SBenson image of today's reality and extrapolating in a linear fashion.
If you take today's reality and try to make a case for profitability, it's physically impossible. You have to have faith in a growing solar market, the ability of the industry to get to scale, and SCTY's ability to execute their plan to maintain share as they spread. Seems to be going fairly well so far on all fronts.
Still gonna hold off on most options for a few months. A bit of cheap 2017 $60's today before we drift up and a ton of 2018's in April/May if/when there's another dip. I'm already covered with 2017's if it takes off in Nov/Dec as cash-flow positive becomes real and the elections end.
I will be very disappointed if Elon, Fisher, and others don't significantly increase their positions today. This could make for a huge inverted hammer. Most analysts upgraded SolarCity today. What gives?
Those saying Elon can't increase his stake due to margin are wrong. People forget SpaceX is worth at least $10-$20 billion.
Those saying Elon can't increase his stake due to margin are wrong. People forget SpaceX is worth at least $10-$20 billion.
I would guess their downside price targets have been mostly hit and they are no longer short.
I'm down six figures just in the past couple of months. Can't say it feels good, but that's what I get for investing in a contracting industry of the past with no growth prospects or future - wait a minute! Well, guess I got plenty of company. Have to admit, am looking to average down, but I don't feel we are at bottom yet. BTW, that is your cue to buy as the stock skyrockets with me.
TheTalkingMule
Distributed Energy Enthusiast
This company already has a minimum of $2B sitting in contracts to be collected. Kind of hard to value that company at less than the $1.84B it's at today. My grandma could buy the company, spend $60M on outsourced maintenance contracts, and pocket the other $100M.
jhm
Well-Known Member
So volume is massive today, already at about 22M shares, 23% of shares. So either shorts are covering big time, or shares are shifting to new owners.
Incidentally, the market cap at $20.5/share is about $2.0B. This is right at the PowerCo unlevered NPV less debt reported for Q4. So it will be interesting to see if this new metric can serve as a floor for the market cap. Such a floor really gives SolarCity very little credit for its DevCo and growth capability, but it may serve as a useful backstop in times like the present. Moreover, one can look forward to this metric growing over time. A simple extrapolation from annual guidance gets to about $3.3B in 2016Q4 and $5.2B in 2017Q4. 40% growth is really not that bad for growing cumulative value.
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Your grandma would also have to pay off the $1.1 debt net of cash on the DevCo side of the business, but that is a highly capable business too, worth much more than its debt. It is highly conservative to assume that the DevCo has zero value. In the next 2 years, it is capable of adding 3 GW to the present 1.9 GW cumulative installed.
Incidentally, the market cap at $20.5/share is about $2.0B. This is right at the PowerCo unlevered NPV less debt reported for Q4. So it will be interesting to see if this new metric can serve as a floor for the market cap. Such a floor really gives SolarCity very little credit for its DevCo and growth capability, but it may serve as a useful backstop in times like the present. Moreover, one can look forward to this metric growing over time. A simple extrapolation from annual guidance gets to about $3.3B in 2016Q4 and $5.2B in 2017Q4. 40% growth is really not that bad for growing cumulative value.
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Your grandma would also have to pay off the $1.1 debt net of cash on the DevCo side of the business, but that is a highly capable business too, worth much more than its debt. It is highly conservative to assume that the DevCo has zero value. In the next 2 years, it is capable of adding 3 GW to the present 1.9 GW cumulative installed.
TheTalkingMule
Distributed Energy Enthusiast
I'd like some insight(maybe in the Townhall) about what the cash-flow positive plan looks like now relative to what it was pre-ITC extension. I mean, the main reason it was happening was to deal with that world without the 30% cushion, we now have that essentially forever. I assume there's a hybrid plan that will get to cash-flow positive while not having to dip from 80% growth down to 40%. How about 60%? Done!
My grandma's no fool, she'd carve off that business first and just keep the back cheese. :wink:
Like Blockbuster? Company's in decline eat up their assets. Not that SCTY is in decline.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
They had a lot of cash when it was clear there would be no more store video rental.
A take on ER:
SolarCity Installed 870MW of Solar in 2015, But Lowers Q1 2016 Guidance | Greentech Media
TheTalkingMule
Distributed Energy Enthusiast
I don't know much about shorting tactics, but everyone should be covering and making an absolute killing today, right?
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