Alternative Energy Investor Discussions

[CyberDutchie]

There goes 30$ on Scty.....

Looking back, I now think it was bad for this thread to be renamed and for the focus to shift from discussing SCTY to the panel providers. A lot of the discussion on SCTY disappeared and the few posting got drowned out by the flurry of postings about solar panel manufacturers, and as a result I feel we missed some clear warning signals on SCTY.

Wrt the solar panel stocks, it's easy for someone to hype stocks when they got in at a very low price and already have 5 or even 10-bagger in their hands. I will never ever listen to their buying advice again.

 

[Norse]

Looking back, I now think it was bad for this thread to be renamed and for the focus to shift from discussing SCTY to the panel providers. A lot of the discussion on SCTY disappeared and the few posting got drowned out by the flurry of postings about solar panel manufacturers, and as a result I feel we missed some clear warning signals on SCTY.

Wrt the solar panel stocks, it's easy for someone to hype stocks when they got in at a very low price and already have 5 or even 10-bagger in their hands. I will never ever listen to their buying advice again.

I have followed this thread ever single day the last months and I disagree. Yes, the focus has not just been on SCTY. But like With TSLA, you need to know what the other Companies do to make Your mind up.
Sleepyhead have done tons of work for us, and you can see what he has to say about SCTY...

Btw: YGE up 9%
SOL and JKS both up 15%
CSIQ up 6%

I have sold out alot of SCTY to buy in on these, so Im very happy with this thread.

 

[blakegallagher]

I bought 25 options when SCTY was around 40 that were out of the money and are near worthless now but Today I bought 10 more that are near the money. I am betting that soon we will find a bottom and Someone had mentioned Solar City becoming profitable this year .... can anyone confirm this as a possibility?

 

[ongba]

Looking back, I now think it was bad for this thread to be renamed and for the focus to shift from discussing SCTY to the panel providers. A lot of the discussion on SCTY disappeared and the few posting got drowned out by the flurry of postings about solar panel manufacturers, and as a result I feel we missed some clear warning signals on SCTY.

Wrt the solar panel stocks, it's easy for someone to hype stocks when they got in at a very low price and already have 5 or even 10-bagger in their hands. I will never ever listen to their buying advice again.

what "clear warning signals" did we miss on solar city? They didn't quite have as good an earnings qtr as tsla, which is the current darling of the street, so scty tanked. Remember, solar stocks (including scty) have had tremendous gains during the 1st half of the year, so any disappointment in earnings and guidance would (and did) send the stocks tumbling down (see spwr). Also, sleepy and others have stated that scty was difficult to value compared to the other solar companies. Sleepy's analysis on solar, as well as tsla (especially the most recent tsla earnings quarter) has been spot on and he has disclosed all his positions in his posts. His contributions have been tremendous and welcomed in both the solar and tsla threads and in no way do I feel he was trying to hype and pump up his holdings. Also, with regards to buying advice, one must always do your own due diligence and research.

 

[Jonathan Hewitt]

The only sell signal I've seen on SCTY was Sleepy saying he was more or less staying away I'm happy with how this thread's been run lately. More SCTY discussion would be good, but that's not the thread renamings problem, that's the problem of people not wanting to talk about it.

 

[DaveT]

SOL at $5.48 and SCTY at $29.49

Here's some quick thoughts on price action today from various solar stocks. (note: I bought SOL calls last Friday and hold SCTY stock since Jan)

SOL (Renesola) had a great Q2 ER reported before open on Friday. It gapped up opening at $5.05 and hit a 2-year high of $5.11 before falling back and filling the gap (dropping to $4.68, it's previous 2-year high) before recovering some to close on Friday at $4.77.

SOL's price action was strong all day today, hitting new 2-year highs several times before closing at $5.48. Volume was high at 6.9m shares traded.

I'm glad that I didn't close out my SOL position on Friday when the stock dipped to $4.7 (after purchasing calls when stock was at $5.05). I actually cancelled my stop loss because I was super impressed by their Q2 ER and wanted to take a longer view on the stock (ie., was thinking of 1-2 week position, but took longer view of 1-2 months).

We'll see what SOL does tomorrow, but if it can take out it's $5.50 resistance level, then I'm expecting price action to be impressive.

TSL (Trina) and YGE (Yingli) also had huge days today, gaining 9% each. All three stocks were relatively flat during the first half of the day, and then took off the second half. (Some other solars did well too like JKS and CSIQ.)

The solar laggard of the day was SolarCity. It broke under $30, which was sad to see but didn't surprise me. It had recently broken a key resistance level, $32.66, on Wednesday and even before that it was trending down. I think there's several things going on. First, SCTY has diverged from the rest of the solar stocks in recent weeks. I experienced this on the day TSL reported Q2 ER. I expected the whole solar industry to be up from their earnings, so I bought TSL and SCTY on a short-term play. It was sobering, because TSL and all the other solar stocks went up that day, but SCTY was alone in the red (I closed my short-term play at the end of that day). I noticed this happened several times in recent weeks and was concerning.

A couple weeks ago, I had shared with my wife my plan to buy puts when SCTY hit $32.30. But when it recently hit that price target, I noticed it was very volatile and so I stayed away and decided to focus my efforts elsewhere (ie., on watching SOL/YGE earnings). But a few weeks ago, I was expecting if SCTY would break the $32.66 level then it would have a good chance to go under $30. I can see the stock going even lower, especially because there doesn't appear to be any near-term catalysts (except the secondary they're offering but that announcement doesn't appear to have helped the stock). Currently though I don't plan on selling my SCTY position (stock bought in January) because 1) My beliefs in the company and market haven't changed, and 2) I'll need to pay very high short-term capital gains tax.

I still like SCTY long-term but I can see the market sentiment turn against it for now. Here's how I see it. ASPs for panels have been increasing the past year and will increase over the next year as well. This helps solar manufacturers with their revenue and gross margins (ie., TSL, SOL, YGE, etc). Previously there was an oversupply in the solar industry, but now that seems to be turning around. With SOL announcing that they've sold out of 2013 inventory, it might mark an inflection point where oversupply is ending. As supply meets demand (or if demand is greater than supply), this will raise solar wafer, module, panel prices and will help manufacturers. However, since SCTY is an integrated installer rising component prices only raises it's costs and is disadvantageous to their business model. Cheap panels are in the best interest of SCTY, but when solar panel prices rise they need to factor in those costs to the prices they charge their customers. And since SCTY's biggest challenge is cutting costs, this poses a challenge to SCTY. (My belief is that SCTY can manage the rising solar panel prices because they're aggressive in their cost-cutting measures. But that's my belief and not necessarily the market's sentiment.)

Also, over the weekend Barrons featured a negative article on SCTY bringing up doubts on how it relies on government subsidies (ie., solar tax credits).

Combine these two factors, namely 1) rising solar panel prices and 2) doubt that SCTY can curb costs enough to overcome expiring government tax credits for solar. And then what you what you have is less-than-ideal market sentiment for SCTY. Yet you have rising positive market sentiment for solar stocks that have been previously undervalued but now are benefiting from rising solar component prices (ie., TSL, SOL, etc).

Update: I haven't been following JKS (Jinko Solar) closely, but decided to do some reading today. Last Wed they reported Q2 ER and they appear to be the first Chinese solar company to return to profitability.
JinkoSolar Holding Co., Ltd. (JKS): JinkoSolar Holding's CEO Discusses Q2 2013 Results - Earnings Call Transcript - Seeking Alpha
http://ir.jinkosolar.com/zhen/upload/201308140355479059.pptx

 

[blakegallagher]

lol it has been a painful discussion as of late ... I will start posting regular updates when my Jan 52.50 calls are in the money !

 

[Norse]

I still like SCTY long-term but I can see the market sentiment turn against it for now. Here's how I see it. ASPs for panels have been increasing the past year and will increase over the next year as well. This helps solar manufacturers with their revenue and gross margins (ie., TSL, SOL, YGE, etc). Previously there was an oversupply in the solar industry, but now that seems to be turning around. With SOL announcing that they've sold out of 2013 inventory, it might mark an inflection point where oversupply is ending. As supply meets demand (or if demand is greater than supply), this will raise solar wafer, module, panel prices and will help manufacturers. However, since SCTY is an integrated installer rising component prices only raises it's costs and is disadvantageous to their business model. Cheap panels are in the best interest of SCTY, but when solar panel prices rise they need to factor in those costs to the prices they charge their customers. And since SCTY's biggest challenge is cutting costs, this poses a challenge to SCTY. (My belief is that SCTY can manage the rising solar panel prices because they're aggressive in their cost-cutting measures. But that's my belief and not necessarily the market's sentiment.)

Very good point. I think this might be a reason why SCTY is doing so bad. They arent on top of the chain when the others are sold out, and can increase the price.

 

[mershaw2001]

Every stock goes through periods of up and down news cycles. SCTY is heading down for now, the sharks are jumping on board now like the barron's article- Nothing news worthy, just bringing up old facts to drive the price lower.
My opinion is that when SCTY crossed the 50 day moving average downward, there was the potential for for hard times but still the chance for a strong recovery of 40. Then when it crossed the 100 day moving average this week, I started scooping up shares for a rebound. My sentiment changed 180 degrees when Elon's purchase had no effect on the stock, and that scared me enough to make me close 80% of my position today at a hefty loss. I still have longer term options, but I'm looking for a day or two of strong volume and a hard price rebound as well as a change in sentiment before i grab shares again. I'd guess that will be in the 22-25 range, and essentially I arrived at that by saying "at what price would scty seem undervalued to nearly everyone". It's only after it becomes clearly undervalued that people realize it's a bottom, and then after that point they are willing to buy in at higher prices because they've now missed the bottom.

 

[Bardlebee]

Every stock goes through periods of up and down news cycles. SCTY is heading down for now, the sharks are jumping on board now like the barron's article- Nothing news worthy, just bringing up old facts to drive the price lower.
My opinion is that when SCTY crossed the 50 day moving average downward, there was the potential for for hard times but still the chance for a strong recovery of 40. Then when it crossed the 100 day moving average this week, I started scooping up shares for a rebound. My sentiment changed 180 degrees when Elon's purchase had no effect on the stock, and that scared me enough to make me close 80% of my position today at a hefty loss. I still have longer term options, but I'm looking for a day or two of strong volume and a hard price rebound as well as a change in sentiment before i grab shares again. I'd guess that will be in the 22-25 range, and essentially I arrived at that by saying "at what price would scty seem undervalued to nearly everyone". It's only after it becomes clearly undervalued that people realize it's a bottom, and then after that point they are willing to buy in at higher prices because they've now missed the bottom.

Do you feel that 22-25 is undervalued? I am a stocking newbie, just wondering what more seasoned people think.

 

[mershaw2001]

Well I honestly don't know. There isn't as much discovery about scty as there is tesla. I felt at 40 the stock was overvalued slightly because of the rising costs of solar panels and the rising interest costs that compete with SCTY financing, and that made 34-36 seem to be a reasonable discount. Then I felt with elon buying at 33 that it was a way of saying "33 is a discounted price to the value of scty". Given that the purchase at 33 did nothing for the stock, I think people are looking for a discount to elon's 33. 20% lower seems a like a steep discount and its where I'd feel comfortable acquiring shares beyond my core position.

Assuming that interest rates fall to 2.50-2.6 in the next few months, and that solar panels don't skyrocket in price beyond the current move, then I'd say this company will prob hit a 50-100 price in several years. However, the market is too short sighted to see that, and is selling on a panic.
That's my take, and without solid numbers to back the price targets.

 

[fjm9898]

Let me know what you guys think about these companies. Am I missing something here? It looks to me that the only risk in investing in these companies is a global recession. The risk is real, but I would only give recession a 30% chance (and the stocks lose 50%), and a 70% chance that these stocks at least double by next year. I like those odds, but definitely not for the risk averse investor.

Sleepy. I enjoyed reading your post and agree in many way. I believe we are looking at the market tip toeing around Solar right now because of the huge boom and bust that happened some time ago and they are still scared as well as alot of companies working to get back to profitability. I think that is the #1 short term player on stock prices right now, writing that black ink, growth shows its coming and people want growth toward profits before they jump in to these companies again. When they companies are profitable again, your going to see many people jump in.

I see this field playing out like Memory has of the past few decades. You had 50 memory companies and the market was flooded. Many companies and even countries went bankrupt because of the fall of the memory market, Last being Elpida in Japan which was a conglomerate of many other failed memory makers (Mitsubishi, NEC ect) Now Micron bought them making only 4 companies remaining.

We are going to see a very similar trend i would suspect in the solar sector. Long term, you are going to have to pick a few horses and see who is going to come out on top.

I can liken memory to solar again. Cheap and function was ok for a time until the big guys took the lead and had better products. Still Memory industry has been over cooked with product for some time and Memory is finally becoming profitable once again both by the consolidation down to 4 players and those 4 player being smart and not over supplying. The cycles in memory down to 4 players due to over supply and lower margins is something solar with go through a few times as well (this cycle has already started with cutbacks in production in the past).

Memory has been very cyclical as well as solar and you have to know when to get in and then back out again. I think we are at the starting gates for a large up swing but only the best companies will survive as the next down turn comes around and you will see Solar companies picking up bits of others, just like Memory. Like i said, you have to pick the winners if your going long term and i can see the winners in the industry by having a few things going for them. Complete system packages for reduced cost and control of their product, product quality vs cost (booth being the holly grail, duh) and in the short term, return to profitability. Return to Profitability will be able to fuel expansion and R&D allowing that company to pull out a lead. After this earning season knowing the top players is still a bit of a grey but i would continue to bet on SPWR (growth was projected low but they should come in above it). SOL is gaining steam with a chance to strike black ink in the new year. TSL has alot going for them and also looking for a huge profitability push soon (Solar city doing well also helps obviously since they are using their panels) and last player but not least in my top 4 I would bet on is CSIQ.

*More companies then my top 4 can and will continue to earn as this solar up turn comes around. I am just trying to think long term and figure out who will still be here if we see anther cycle downward. Cash will be king when it comes. Timing it will be the next play and it could be soon if we see a recession come into play.

 

[drinkerofkoolaid]

Does Solar City have a patent on its approach to Solar Leasing? Methods of processing information in solar energy system - Patent # 8249902 - PatentGenius

 

[InTheShadows]

Looking back, I now think it was bad for this thread to be renamed and for the focus to shift from discussing SCTY to the panel providers. A lot of the discussion on SCTY disappeared and the few posting got drowned out by the flurry of postings about solar panel manufacturers, and as a result I feel we missed some clear warning signals on SCTY.

Wrt the solar panel stocks, it's easy for someone to hype stocks when they got in at a very low price and already have 5 or even 10-bagger in their hands. I will never ever listen to their buying advice again.

You can bet that I am buying these solar stocks up. You see because I bought them in 2008 and saw my entire solar portfolio loose 75-90% I have been working in the solar industry for 6 years now and I have seen the cycles, been through them, and even been a part of them. Even when solar stocks were flying 3x higher than they are now the industry was not this hot. Look at Chinas policy for installing solar (to generate power for their country). They are going to dwarf the rest of the global solar industry. With their current plan within 3-4 years they will dethrone Germany, whom has been massively installing solar at a breakneck pace for 10 years. In 2010 Germany installed more solar in one city that the ENTIRE USA.

Look at their stock history, they have 4-5x the capacity they had 5 years ago and all of them are much more efficiently run and silicon is dirt cheap now. There is no reason any of them do not deserve a $30-50 share price again.

 

[sleepyhead]

@mulder1231 - I am sorry you feel that way. I think that I am the only one here that ever posted anything negative on SCTY and quickly got bashed by others here for doing so. People would say that they prefer SCTY because "it doesn't make it's own panels" and I would respond that what seems like a positive today (it did seem that way two months ago) will be a negative in the future. The future happened a lot sooner than expected and now SCTY is suffering. I posted many, many risks for SCTY here but nobody really cared to listen.

The reason for SCTY's drop is that it was in a bubble that was caused by a very small float pre lockup expiration. The way bubbles work is that the stock goes up way too high (obviously), but what most people don't know is that after the bubble bursts the stock tends to over-correct and goes down a lot lower than it should. Therefore SCTY will over-correct and it will present a great buying opportunity. The only problem here is that nobody in the world (not even Elon Musk) can put a fair valuation on SCTY and it is impossible to tell when you are getting a good deal on the stock. It may fall to $25 or it may fall to $15, it is impossible to tell.

There are still "financial" people who think that SCTY will go bankrupt in a few years. There is a lot of risk associated with SCTY, but I think that it will survive and prosper. Still can't figure out how to value this company though, so investing in SCTY for short term gains is pure gambling. I will stick to other solar companies that I know for sure are undervalued.

@DaveT - I am glad that you hung on to your SOL calls from Friday. I actually read over the transcript from the conference call yesterday and I immediately bought some SOL options at market open because I had a feeling it would have a huge day today. I still think that this stock has more room to run, but did sell a small portion of stock and options late in the day to take some profits; even though I feel like this will be a huge mistake, I still have plenty of exposure to SOL.

Let me know what you think about JKS. I do not have as much time for research as I would like and therefore I have not researched JKS. What I like about the company is that they have a total solutions business (like SPWR, FSLR, and CSIQ) and that is why they are able to achieve such high margins. I feel like I missed out on this one, but it is still very cheaply valued so let me know if you think it is still a buy.

Thanks for sharing your research and opinions with us DaveT.

@fjm9898 - I like your comparison to Memory manufacturers. The solar industry has been consolidating and will continue to do so for the next few months. The thing about solar though is that there are not that many tier 1 manufacturers and hundreds of smaller tier 2 and tier 3 manufacturers. I think that you will do good by randomly picking a few tier 1 companies such as TSL, YGE, CSIQ, etc. Even a good company such as SOL has only been added to tier 1 a couple of months ago.

I don't think that there will be a clear winner in solar, but that a rising tide will lift all ships. The only company that has enough cash to crush the competition is FSLR, but unfortunately they have the wrong technology and a bad business plan. It looks to me like they are just trying to milk the status quo and will end up in trouble like Honda will in the next decade (left in the dust by TSLA).

A few final notes on the solar sector:

SCTY is highly valued and is going down because of rising panel costs and rising interest rates. Their recent secondary offering is not a positive catalyst for the stock, but is a negative and the market rightfully treated it this way. I am sure that Elon Musk will make a huge return on the shares he bought at $33, but that is because he will hold them forever. They issued shares for "general corporate purposes" among other things and that never looks good.

As far as US listed Chinese Solar companies, here is my opinion - I think that there is a 30% chance for a global recession in the next 12 - 18 months and these stocks will go down 50% if this happens. 70% chance that the global economy expands and these stocks will triple. My expected return can be calculated in the following manner:

(30% * -50%) + (70% * 200%) = 125%

I like 125% returns. I am happy to take the chance and roll the dice. Please do your own due diligence beforehand if you plan on investing. Reading transcripts from the conference call is the bare minimum, but at the same time it is more than enough to make an informed investment decision. It doesn't take much time to research a company.

It's pretty simple in my opinion: If you think that the global economy will prosper over the next two years, buy solar. If you think it will contract, then don't buy solar.

I still think that the tier 1 Chinese solar companies are priced ridiculously cheap and that if they reach consistent profitability their share prices will have to double at a minimum. It is just that the market doesn't believe this to be case, but I disagree with the market. My knowledge of solar is still limited and there are many things that I am missing in my analysis; but I am not worried a bit about that because IMO it is a simple matter of supply and demand. Demand will catch up with supply a lot quicker than anyone is expecting. I am actually worried that there will be a panel shortage in the very near future.

Solar is such an obvious solution to all of the world's problems and there is nothing that is going to stop this train. Now it is just a matter of battery storage technology catching up to make all other power plants obsolete. It is only a matter of time, but I expect all power plants to shut down by the end of the century.

 

[farzyness]

Solar is such an obvious solution to all of the world's problems and there is nothing that is going to stop this train. Now it is just a matter of battery storage technology catching up to make all other power plants obsolete. It is only a matter of time, but I expect all power plants to shut down by the end of the century.

Your last point is exactly why SCTY is positioned to reap the highest benefits in the long term. Solar panels will get better, and SCTY will always be able to take advantage of them. They won't be stuck manufacturing a lower grade panel, and thus will not be subject to competitive downfalls. Their partnership with TSLA (which primarily a car company today, will be a HUGE player in battery tech in the coming years, if not already) will give them, by far, the best exposure to the best battery tech.

To me, SCTY is STUPID cheap at today's prices. People are panicking and overselling as you stated because it's hard to think of a valuation for SCTY. That in itself tells me the potential is ridiculous, and thus I'm buying.

And of course, as long as Elon Musk.

 

[InTheShadows]

I am actually worried that there will be a panel shortage in the very near future.

This is already happening. Lead times are currently increasing. That is the first sign along with quarter over quarter price increases.

 

[DaveT]

This is already happening. Lead times are currently increasing. That is the first sign along with quarter over quarter price increases.

Can you give us an idea on what current lead times are and what lead times used to be?

 

[sleepyhead]

Your last point is exactly why SCTY is positioned to reap the highest benefits in the long term. Solar panels will get better, and SCTY will always be able to take advantage of them. They won't be stuck manufacturing a lower grade panel, and thus will not be subject to competitive downfalls. Their partnership with TSLA (which primarily a car company today, will be a HUGE player in battery tech in the coming years, if not already) will give them, by far, the best exposure to the best battery tech.

To me, SCTY is STUPID cheap at today's prices. People are panicking and overselling as you stated because it's hard to think of a valuation for SCTY. That in itself tells me the potential is ridiculous, and thus I'm buying.

And of course, as long as Elon Musk.

I agree that SCTY will most likely be a very good long term player. But I see too many risks in SCTY, and if I was looking for a long term investment, I would put all my money in TSLA, which is a lot safer than SCTY.

In the short run, I think it is more likely that SOL reaches $1bn market cap than SCTY reaches $7bn - $8bn.

This is already happening. Lead times are currently increasing. That is the first sign along with quarter over quarter price increases.

Theshadows - thanks for sharing your knowledge and expertise on this topic. Your posts are invaluable and are greatly appreciated.

 

[CyberDutchie]

@mulder1231 - I am sorry you feel that way. I think that I am the only one here that ever posted anything negative on SCTY and quickly got bashed by others here for doing so. People would say that they prefer SCTY because "it doesn't make it's own panels" and I would respond that what seems like a positive today (it did seem that way two months ago) will be a negative in the future. The future happened a lot sooner than expected and now SCTY is suffering. I posted many, many risks for SCTY here but nobody really cared to listen.

Appologies, my wording was a little too strong when I posted at the close, being very, very frustrated with SCTY falling through the $30 level. And on top of that, the building inspector today didn't sign off on the installation for the stupid reason that the carbon-monoxide alarm had to be "hard wired" in stead of battery powered! (SolarCity guy got really mad at the inspector, I thought it was gonna turn into a fight, LoL).

I really appreciate all insights and opinions given here, but fact is that the discussion on SCTY has slowed down and just a few members pitch in. I remember there were more posts a while back. Do your own research disclaimers...yeah, if you have the time for it. That's why I visit these forums, because I don't.

I've posted some questions that went unanswered. I still don't know what to do with my Oct 17 $20 options. $27 will mean break even, $24 is loss, $15 is expire worthlessly. But, there are still 6 weeks to turn things around so I probably will keep them.