SolarCity Earnings – Mixed Results But Good Prospects
Harris Roen, Editor
Roen Financial Report
May 14, 2013
SolarCity (SCTY) has been one of the hottest alternative energy stocks since its Initial Public Offering five short months ago. Yesterday it shot up 24% in one day, on the largest one-day volume since it opened, in anticipation of its quarterly earnings release. It is up 95% in the past three months, and has more than tripled from its initial trading price. As of this writing SCTY has given back about a third of yesterday’s stratospheric gains.
Now that earnings have been released, let’s take a grounded-in-reality look at this innovative solar company.
SolarCity’s earnings results were mixed, showing steady revenues, but also a net loss for the first quarter of 2013 (chart above). It’s disconcerting that net income has been negative for the past four quarters, and on a per share basis, the most recent losses were 28% greater than analyst expectations. Revenues, on the other hand, came in ahead of analyst estimates, but just barely.
If SolarCity is to make it as a company, it needs to successfully implement a business plan that grows its customer base in a big way. It therefore makes sense to look at data relating to its clients. The chart below shows data for each of the past four years, and compares it to the most recent quarter.
Customer growth remains robust for the first quarter of 2013. 2012 was off the charts, with SolarCity adding on 30,950 new clients. The first three months of 2013 added close to a quarter of that number, which is good news for FY 2013 projections.
Total revenue per customer is declining steadily, but that is to be expected as the number of customers dramatically increases. What is occurring though (and what we want to see) is that the net loss per customer is steadily decreasing. It has changed from a low of around $5,000 in 2010 and 2011, to about $500 in the most recent quarter. If SolarCity can keep that trend going then the company will soon be in the black again. Another important metric is the acquisition cost per customer, which has remained steady at 2012 levels.
I also find it encouraging that SolarCity’s debt levels remain reasonable, just about the same as 2012 levels. It is important to understand that in many ways SolarCity is a financial company, crafting and offering creative finance options to allow clients to get solar done with minimal up-front costs. As with other financial firms, debt is a big part of SolarCity’s business, so it must be analyzed under that spotlight.
Though I still view SolarCity as an investment for the speculative portion of a portfolio, the long-term prospects for this company are very compelling. For example, SolarCity recently announced its biggest project to date—a 24 megawatt, 6,500 Homes in Project at Navy and Marine Bases in Hawaii. Investors that are willing to ride the SCTY stock price rollercoaster are likely to be rewarded in the long term.
IMPORTANT INFORMATION
Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.
Two Dynamic Companies Added to Paradigm Portfolio
Harris Roen, Editor
Roen Financial Report
May 6, 2013
A solar stock and an environmental company have been added to the Roen Financial Report Paradigm Portfolio this month. One recycling company is being removed.
SunPower Corporation (SPWR) is being added as a result of its strong price momentum and upwards earnings estimate revisions. SPWR is a vertically integrated California-based solar company involved in the manufacture, installation and service of photovoltaics. Its stock has more than tripled in price on large volume since its December lows, up 260%! Sales have been strong, and the stock price is still below levels of around two years ago. We still see upside potential from here. It should be noted, however, that the Roen Financial Report considers SPWR a speculative investment since it has high volatility, and is still in negative earnings territory.
CLARCOR Inc. (CLC) provides air and water filtration products worldwide. This sizeable company has over $1 billion in sales, and over 5,000 employees. It has high quality financials with growing dividends, steady earnings and low debt. CLC is being added this month because it is reasonably priced, trading in the mid-range of what the Roen Financial Report calculates to be fair value.
Kadant Inc. (KAI), a small cap company that supplies equipment for the papermaking and paper recycling industries, is being dropped from the Paradigm Portfolio this month. We still consider this a high-quality company, but it looks overpriced at these levels. We will continue to track KAI for reentry into the portfolio if its price becomes more attractive.
The objective of the Paradigm Portfolio is to pick the highest quality companies that are considered best positioned to benefit from the economic paradigm shift away from foreign oil and polluting coal and towards cleaner energy alternatives. These are leadership companies that play an important role in redefining our energy future.
IMPORTANT INFORMATION
Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.
Remember to always consult with your investment professional before making important financial decisions.
Stock Alert – Solar Gainers and Losers
Harris Roen, Editor
Roen Financial Report
May 3, 2013
Five solar stocks announced key updates – three show improved prospects, and two warn of danger.
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| Power REIT will acquire 100 acres of land underlying a 20 megawatt solar array to be developed. The leasee will sell electricity to Pacific Gas & Electric (PG&E) and Southern California Edison (SCE), which should then provide a steady income stream to PW shareholders. The stock price is up 11% for the year, in addition to a yield of 3.9%. | Press release |
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| AEIS issued a respectable, though mixed, earnings report. Profits were up and net income jumped considerably, but revenues dropped slightly and EPS was down 17% from the previous quarter. Q2 2013 guidance was in line with analyst estimates, which are projected to come in 18%-30% above current levels. The stock had a nice bounce on the news, and is up 34% for the year. | Reuters article |
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| A positive earnings report caused a jump in SunPower’s stock price, up 18% yesterday and 171% for the year. Revenues dropped slightly for the quarter, but were 30% higher than the same quarter one year ago. The company also announced it will supply Verizon with rooftop and ground-mounted PV systems in 6 states. | Press release |
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| GTAT stock remains battered on a poor earnings report. The stock dropped 5% in one day on large volume, and is down 43% for the year. The company announced it sill stop offering earnings guidance going forward. | SolarServer article |
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| Losses continue for STRI, with revenues 30% below the previous quarter, and 64% below the same quarter last year. Profits and net income showed improvement compared to losses of the previous quarter, but still remain negative. STRI stock is down around 90% from its highs in late 2010. | Press release |
IMPORTANT INFORMATION
Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.
Alternative Energy Mutual Funds Outpace ETFs
Investors love Exchange Traded Funds (ETFs). They trade like stocks, and are an easy way to diversify within a certain sector. Over the past year, though, alternative energy investors would have been much better off putting their money in regular mutual funds. The results are detailed in the April edition of the Alternative Energy Mutual Funds & Exchange Traded Fund report.
Performance for alternative energy mutual funds were very good for the past 12 months, averaging 11.7% for the eleven funds covered by the Roen Financial Report. In fact, eight out of 10 funds had double-digit gains for the year (there is no data for Brown Advisory Winslow Sustainability (BAWAX) since it only started trading in June 2012). Also, Most of the mutual funds are trading near the top of their annual price range.
Three month returns have also been respectable, with ten out of eleven funds posting annual increases (and Guinness Atkinson Alternative Energy (GAAEX) just showing a slight loss).
Returns for ETFs were much more variable than MFs. One year returns ranged from a gain of 24.2% for Market Vectors Global Alternative Energy ETF (GEX), to a loss of 35.2% for iPath Global Carbon ETN (GRN). Of the 17 alternative energy ETFs that the Roen Financial Report covers, over half showed annual gains. On average, though, returns were basically flat for both 12 months and 3 months.
Despite this lackluster performance for ETFs, their prospects seem to be getting better. On a rolling average basis, one-year returns have improved for alternative energy ETFs. In March, for example, the average ETF lost 6.8%. Similarly, there were one-year losses for February, January and December 2012. In fact, December saw an average ETF loss of 15.1% over the course of a year. The Roen Financial Report will be watching this trend closely to see if alternative energy ETFs continue to improve.
Though this discrepancy between ETFs and mutual funds may vary over time, alternative energy investors are wise to look at the entire fund landscape when deciding where best to deploy their assets.
IMPORTANT INFORMATION
Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.
Newly Updated Report Crucial for Solar Investors
Harris Roen, Editor
Roen Financial Report
April 25, 2013
The Roen Financial Report is pleased to announce a significant update to its special report Invest Solar: Solar Energy Investment Opportunities. This revealing report will help readers navigate the challenging and potentially rewarding world of solar investing.
Solar energy started as one of the hottest investment themes of the past decade, but has since become extremely volatile. The chart at right shows that between 2006-2008, solar stocks gained an average of 50% for any one-year period as measured by the widely watched Ardour Solar Energy Index (SOLRX).
By the end of the decade, however, solar stocks lost their luster as the photovoltaic market became saturated and a tariff war ensued. From 2009 into 2013, solar stocks have been down 36% over the average 12-month period.
Because of this volatility, investors are wise to understand the different types of solar companies. Investments in solar cover a wide range of company types along different levels of the supply chain and using differing technologies. The newly updated report details four different sectors within the solar industry:
• Solar Equipment Manufacturers
• Photovoltaic Production
• Installation and Service Companies
• Utilities Employing Solar
In addition, Invest Solar outlines three alternative types of solar investment, including:
• Solar REITs
• Master Limited Partnerships
• Solar Crowdfunding
The report compares 41 solar energy companies, making an apples-to-apples judgment within each of the four solar sectors. It also gives the pros and cons of similar stocks, showing the best companies within each category, and describes what has put them on top.
Despite the challenges investing in solar, opportunities still abound. For example, photovoltaics are being deployed on a scale that would have been hard to imagine just 10 years ago. In the U.S. alone, an estimated 3.3 gigawatts of new solar capacity was installed in 2012, which is as much as was installed in the 4 previous years combined!
Considering this and other trends, three clear themes are outlined in the report to aid in investment decisions:
• Consolidation
• Installation
• Determination
Overall, I believe solar is set to continue its growth and prove an excellent long-term investment if you are in the right stocks. I urge you to download the updated report today!
IMPORTANT INFORMATION
Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.
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