SolarCity Corp (NASDAQ:SCTY) saw its shares collapse 30 percent after the solar energy firm projected a bigger-than-expected loss for the first quarter amid declining installations. This means Elon Musk, who owns a large stake in the firm, is down $705 million on shares. Can SolarCity turn things around?
SolarCity – A Look at the Numbers
The residential solar panel installer noted that its installations will fall short of its target. This means the firm is forecasting a bigger-than-expected loss for the first quarter. SolarCity put forward just 272 megawatts in the fourth quarter, which was below its maximum 300 megawatts expectations.
SolarCity is expected a loss of as high as $2.65 a share for the current quarter. This is higher than analysts’ expectations of a loss of $2.36 per share. Meanwhile, net income attributable to shareholders was $4.6 million, from a loss of $3.6 million the previous year. Revenues jumped 61 percent to $115.5 million, which beat analysts’ estimates of $105.6 million.
SolarCity’s rate of panel installations has also slowed sharply from the fourth quarter.
On the news, SolarCity shares fell as high as 30 percent in after-hours trading Tuesday. Over the past 12 months, it has lost 65 percent of its value. Year-to-date, shares are down 62 percent at around $19.
Elon Musk, who is backing the solar firm, lost about $705 million in his 21 million shares after the disappointing results. Musk, the founder of Tesla Motors Inc (NASDAQ:TSLA), has lost $3.3 billion after both firms reported terrible earnings.
Why is SolarCity Performing Badly?
Many are wondering why exactly SolarCity, the firm that reached as high as $80 a share in 2014, is performing so poorly.
The firm claims its losses come down to delayed commercial projects and various public policy changes, like what’s going on in Nevada. The latter is what makes solar panels seem less attractive to homeowners and businesses.
SolarCity, which once had a market valuation of $7 billion, may not see any positive news until at least 2018. The firm wanted its Silevo solar panel manufacturing plant to be in full production this year, but that may not happen until the middle of 2017.
Any sort of delays will have a negative impact on SolarCity’s future because rivals will have more time to improve their own solar panel plans and rein in the costs.
Investors are likely disappointed in SolarCity, especially because many bought it for its growth rate. However, as Nasdaq reports, the solar firm is likely going to be a slow growth company. Pundits say SolarCity is in a better long-term position because it’s a lot more stable, its operating costs have been slashed and it’s still generating profits.
Investors may receive better value today than when SolarCity filed its initial public offering (IPO).
In a statement, SolarCity hinted that it wants to start selling to outside investors on the idea of expected cash flow streams.
“We believe the key will be the cash equity monetization of up to 100% of the contracted value of a portion of our new assets with no (or much lower) debt. We expect to have an update on this strategic initiative soon. Stay tuned.”
Many investors are demanding better results right now. They’re not betting on future expectations and what-ifs. Can SolarCity deliver? Not if investors don’t have the patience.