SolarCity Q4 Review: Negative Trends Continue
Summary
SolarCity reported Q4 earnings that missed analyst targets.
A couple of negative trends continue to pop up.
The stock isn't likely to gain traction without proper resolution of these negative trends.
SolarCity (NASDAQ:SCTY) remains good at installing new rooftop solar power systems at breakneck speed. The company though is slowly losing momentum in convincing investors that these systems make a good investment with the outlandish operating expenses. After another miss and more importantly continuing negative trends, investors don't appear so convinced that the growing solar deployments are adding the same value as proposed by the management team.
Is the stock that peaked at nearly $90 a year ago actually heading below $50 for good?
One Disturbing Trend
SolarCity reported a Q4 loss of $1.33 per share once adjusting for some unexpected expensed costs that wasn't too far from the $1.27 loss forecast by analysts. The disturbing trend is that the stock roared to the all-time high after beating Q413 estimates by $0.09 last February. The company only lost $0.46 that Q4 and the loss nearly tripled this Q4. SolarCity guided towards a Q1 loss of $1.70 at the mid point, or around $0.45 below analyst estimates.
Even more concerning is that the trend is forecast to get even worse next year before the company guided down for Q1.
SCTY EPS Estimates for Current Fiscal Year data by YCharts
SolarCity can discuss the retained value of 20 and 30 year contracts all it wants, but any company reporting a gross profit of $15 million and operating expenses of $135 million isn't going to create a lot of retained value for a long time. Heck, even the interest expense of $18 million alone exceeds the gross profit.
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