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SolarCity will be a bankruptcy solar energy companies of the United States shares?

Author: Source: Datetime: 2016-11-07 18:21:47

Last week, SolarCity (NASDAQ: SCTY) price in recent high of $33, Wall Street institutions have issued a bearish comments, such as the well-known Wall Street big bear Jim Chanos first announced its SCTY Shortsell short positions, and continue to put the stock, SCTY hidden risks, each containing a set of equipment not only do not earn instead compensate, investors are advised to promise not to care about Elon Musk, because now almost no one realized.

A few days later, Axiom CapitalManagement asset management analyst: Jotun Johnson SCTY before the financial report gives only the "SELL" rating, while the U.S. stock market, according to the SCTY rating, 12 institutions were given "BUY" buy "rating, 9 institutions were given a hold rating.

This Monday, SCTY announced its share price overnight too horrible to look at earnings, fell 25%, compared with this year's opening price of about $50, down more than 60%.

Many people began to question whether the solar sector is completely into the crisis, and SCTY will become the next Sunedison (SUNE), is about to face bankruptcy. The following five points of view, perhaps can be interpreted, why SCTY's nightmare is just beginning.

One reason:

SCTY says they will generate positive cash flow this year (revenue > expenses). But, with what?!

Simply to say, the company's solar power generator installation growth rate has been essentially a sign of slowing down, the reason is that:

Competition (including from other solar companies and banks)

Funding from ZF (incentive) is weak

Consumers' demand for expensive solar panels is reduced.

The US solar market is already saturated.

From the following figure, we can also find that the demand for third square installation of solar panels to reduce the demand, meaning that the top user is more inclined to install their own solar equipment.

third party installations as a percentage of the total

The entire solar generator industry received a reduction in the installation of applications, suggesting that the future demand will face a significant decline.

total applications received

SCTY received a substantial decline in the installation of applications in 2016, which may affect the company's performance outlook for this year.

applications received total versus top 4 vendors

In February, SCTY accounted for market share in California than in January and 2015 average annual decrease in real.

Megawatts as age of total

So, SCTY ready to deal with it? They tell investors that SCTY is being developed by growth firms to value based companies, and that the way they define value companies is positive cash flow. However, the definition of positive cash flow is not, operating cash flow is positive, or free cash for the positive, or tax interest depreciation and amortization of profits before it? However, the definition of SCTY for cash flow is that the free cash flow also includes all the financing generated during the quarter!

In other words, you run a company, burned for $1 million in cash, but you borrowed a lot of money, and these debt and leverage are included in the free cash flow that you define, and then outside that you run in the right way, the company operating in good condition. But the new definition of cash flow financial illusion is obviously in self deception, the fundamentals of health or not, at a glance.

Two reasons:

SCTY each quarter reiterated the way they calculate the cost per watt (that is, the cost of the key indicators are derived, and the published) a low cost. The wording used by the company is nothing more than: "the cost of the calculation method has been updated, after the calculation will exclude the cost associated with the operation of PowerCo investment portfolio." SCTY is not the first to do so, changes in the calculation of cost when is familiar, is only this quarter, emerge in an endless stream, in addition to update the company report cost way, the company reported revenue of main business and cost way also changes, can be said to be a step by step.

best-in-class installation costs down 6%

Three reasons:

SCTY has its own unique business: photovoltaic leasing, in this mode, SCTY and residents signed a 20 year agreement for the residents to build and maintain the roof photovoltaic system, and provide solar backup generator services. As a result, many investors have given the additional value of the business, the majority of customers will be in 20 years after the renewal of the contract with SCTY. But in fact, how many people will be willing to 20 years later, with a higher price, but it is 20 years ago to install solar panels, continue to renew it with SCTY it? Like who would be willing to use higher prices to buy a 1996 instead of 2016 computers? Therefore, this so-called renewal is nothing more than to give customers a choice only, whether it can create value in the future is a question mark.

Four reasons:

Four months ago, the cost of the debt held by SCTY is about 4.5%, after almost no change in interest rates, but their capital costs are much higher, reaching 8.23%. Assuming the fed to raise interest rates again, their situation will be more difficult.

Five reasons:

Last year, SCTY spent $800 million to install 870 million megawatts of solar panels, which is 92 cents per watt, the company is undoubtedly a mounting losses, but the losses are not calculated at any cost.

In summary, SCTY is such a burn, whether it is operating cash flow, free cash flow, or EBITDA are negative, but also has net debt of $2 billion 400 million, while its business model is to issue and needs permanent capital less reliable as the premise. Therefore, to measure the SCTY of real stock prices is very difficult, but historically, those who had the same experience of the company, for example, there is a lesson for SUNE, the company's share price will be not worth a farthing.

Therefore, SCTY step by step into SUNE may be just a matter of time, but now it seems to also care about ElonMusk SCTY's situation, he is now preparing for the heart, Tesla (TSLA) and SUNE.

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