SolarCity (SCTY)

[pGo]

How difficult would it be for them to switch the bulk of their business from lease to loan?
Isn't economy of scale a significant advantage in marketing, sales, loan financing, panel purchase, installations, microgrid management, etc?

That's where I thought the scale would help. But the numbers certainly suggest the opposite specially for marketing and sales which are sunk cost. Future interest rates would be a concern. Panel purchase, installations, and other tools they buy may be beneficial with scale.

What out of all this translate to uniqueness to end users? And if that's sticky, the sg&a should go down.

 

[tftf]

Why, is Sunpower cutting back? SCTY can undercut SPWR in high efficiency panel pricing for everything they don't need. All the other manufacturers (CSIQ, JKS, JASO, TSL etc.) are heading towards 5GW of production.

These other producers already have economies of scale today.

You compare a new, unproven entrant with existing huge players who survived the first solar down-turn and are very lean and able to work with low margins (otherwise they wouldn't be around today).

What is your new price target for SCTY since you recommended buying the stock near the 52W-high in early August 2015?

 

[electracity]

How difficult would it be for them to switch the bulk of their business from lease to loan?
Isn't economy of scale a significant advantage in marketing, sales, loan financing, panel purchase, installations, microgrid management, etc?

Loans don't really work with solarcity's sales pitch. Their pitch is "something for nothing". Even solarcity target market understands a loan is debt. A PPA masks the financial obligation for their target market.

PPA's created a product that could be successfully sold to low information consumers. Solarcity is de-accelerating at the point of maximum interest in solar because even smart b.s. has a limited lifetime in a competitive market.

What is good for solarcity is bad for customers. Their position only works long term with a monopoly.

 

[ggies07]

Loans don't really work with solarcity's sales pitch. Their pitch is "something for nothing". Even solarcity target market understands a loan is debt. A PPA masks the financial obligation for their target market.

PPA's created a product that could be successfully sold to low information consumers. Solarcity is de-accelerating at the point of maximum interest in solar because even smart b.s. has a limited lifetime in a competitive market.

What is good for solarcity is bad for customers. Their position only works long term with a monopoly.

Not really. We already have loans on our cars and house and don't want another one. What I do want is to go solar today (because I understand what's going on with our environment and solar is the better choice) and have the monthly payments the same or lower than my utility bill. I could care less who owns the hardware, I just want to get my energy from a sustainable source and it's obvious others think this way too. I mean, that's what it's all about, right? If SolarCity hadn't come along, the industry wouldn't be as far along as it is now.

Now, do I use SolarCity? No, I'm still unsure about the escalator in years 10-20, otherwise I would have already had them on my roof. So don't act like it's a ridiculous business model.

 

[dalalsid]

Loans don't really work with solarcity's sales pitch. Their pitch is "something for nothing". Even solarcity target market understands a loan is debt. A PPA masks the financial obligation for their target market.

PPA's created a product that could be successfully sold to low information consumers. Solarcity is de-accelerating at the point of maximum interest in solar because even smart b.s. has a limited lifetime in a competitive market.

What is good for solarcity is bad for customers. Their position only works long term with a monopoly.

The MyPower product seems to be working. Also the high credit scores seem to contradict low information customers. How can lower power bills be bad for customers? Granted they could be even better with a smaller mom & pop installer but doesn't mean they are bad with SCTY. Lease retained value grew 16%, Mypower grew 10%, so customers still seem to be preferring leases.

 

[TheTalkingMule]

Not really. We already have loans on our cars and house and don't want another one. What I do want is to go solar today (because I understand what's going on with our environment and solar is the better choice) and have the monthly payments the same or lower than my utility bill. I could care less who owns the hardware, I just want to get my energy from a sustainable source and it's obvious others think this way too. I mean, that's what it's all about, right? If SolarCity hadn't come along, the industry wouldn't be as far along as it is now.

Now, do I use SolarCity? No, I'm still unsure about the escalator in years 10-20, otherwise I would have already had them on my roof. So don't act like it's a ridiculous business model.

I originally hated this SCTY business model, it seemed inefficient to me. I know what I want and I know what it costs, so I'm not going to pay more than the interest on a loan to get that product. But that's me, most people have multiple kids and are in the situation you described. They want to go solar, but don't need or want to get that deep into it. They want American made panels, they want to go with a market leader so they know the company will be around and they don't want to deal with maintenance or replacement if something goes wrong. Providing a unique service/product is what counts, nobody can do all these things today other than SCTY and I don't see how anyone else can provide that plus rate certainty any time soon.

Again, this is from a person who likely will never be a SolarCity customer and doesn't even like the model! Though feel free to listen to random shorts and their disinformation above.

What a frustrating day, I'm gonna go do some housework to disconnect.

 

[jhm]

It's not that they are not unique. It is the value of the "unique" is nowhere good enough to maintain the margins they had in the past. Their customer acquisition costs are rising, and their margins are shrinking on the sales they make (decreasing retained earnings).

They will never grow again at the rate of past quarters. Now they will slow down and cherry pick.

Their older PPAs have substantial value. How to value their panel factory is a big guess.

Hey, electracity, I actually agree with you on this.

It is about targeting your marketeting spend. Some marketing efforts are more cost efficient than other. Passing on the marginally most expensive ones is just smart business.

Suppose I can generate 1000 leads per week for you, and you you know that you can convert 20% into sales with an average of 5kW per sale. That is 1MW total or 1000W/lead. So how much will you pay me for my leads? If I offer them for $100k per 1000 leads. That would imply a lead cost of $0.10/W, and that might just be super for your business. Then comes along a competitor willing to pay as much as $199k for an exclusive on my 1000 leads. Are you now willing to pay $200k which you can convert to $0.20/W? Maybe, but the margins are getting tight. Now suppose you are in fact SolarCity and because of your shear market presence at least half of everyone in the market for rooftop solar is already giving you a call before selecting their installer. So of the 200 new customers you might convert from this list, you would have gotten half of them even without buying the lead list. So your incremental $200k for leads is only netting you an incremental 100 customers for 500kW. So on a marginal basis to buy this list you are paying $0.40/W in addition to many othe sales coats. At some point this becomes a deal breaker. Note that competition drives up the cost of leads, while established market presence dilutes the incremental value of those leads. So it is rational for smaller players to spend more per lead than the market leader.

Conversely, the market leader benefits more on increasing the size of the market with "education", aka advertising, than from paying for exclusive leads. In this regard, coming out with Tesla Powerpacks should generate significant awareness and interest. The advertising benefit of Powerwalls should not be underestimated. Powerwalls will generate inquires and conversions. If you allocate some portion of sales cost per Watt to Powerwalls, i.e., interest in Powerwalls offsets some of the sales cost and maybe increases the size of the job, then SolarCity may be able to offer systems with Powerwalls at surprisingly little marginal cost to the customer. For example, if offer a Powerwall on a 5kW system offsets as little as $0.05/W in sales cost, then SolarCity could come out the same with a 14c/kWh PPA on a 5kW system with Powerwall as with a 13c/kWh PPA without battery backup. If they pulled this off, my guess is that uptake of the Powerwall option would be quite high. This imposes a couple of constrains. First, they would need to focus on larger systems. 5kW may be break even with this option, but 10 kW make the option quite profitable. So they'll need to target larger homes. Next, Tesla could well be supply constrained on Powerwalls through 2016. So again they'll need to be selective about where to offer the Powerwall option. It is plausible that the Powerwall supply constrains SolarCity to 1.25 GW in 2016 bcause it can only pair it wit 1.25 GWh of Powerwalls/packs. SolarCity is not tipping their hand so much if this is the case. We'll just have to wait to see how SolarCity markets systems with Powerwalls.

 

[electracity]

The MyPower product seems to be working. Also the high credit scores seem to contradict low information customers. How can lower power bills be bad for customers? Granted they could be even better with a smaller mom & pop installer but doesn't mean they are bad with SCTY. Lease retained value grew 16%, Mypower grew 10%, so customers still seem to be preferring leases.

Where do you think Solarcity's retained earnings come from? People increasingly choose to keep the retained earnings for themselves.

 

[jhm]

Just got long at $30.05. First entry into this stock. Good luck everyone.

Hey, it's great to hear that the stock could be attracting new shareholders. All the best.

 

[esk8mw]

Hey, it's great to hear that the stock could be attracting new shareholders. All the best.

Wish I exercised a bit more patience! If we make a new low today I'll load up on some calls as well. Stock appears rather oversold at the moment.

 

[aznt1217]

Wish I exercised a bit more patience! If we make a new low today I'll load up on some calls as well. Stock appears rather oversold at the moment.

Come 2:30 we'll start to see covering and short profit taking. We already hit a 52 week low during the intraday.

 

[esk8mw]

Come 2:30 we'll start to see covering and short profit taking. We already hit a 52 week low during the intraday.

Exactly. Might make a short term options play to exploit this. Will check on SP action throughout the day to see if I should pull the trigger. Dreaming of a rebound like TWTR's most recent ER swing.

 

[jhm]

How difficult would it be for them to switch the bulk of their business from lease to loan?
Isn't economy of scale a significant advantage in marketing, sales, loan financing, panel purchase, installations, microgrid management, etc?

There's no difficulty here. They already offer loans at 4.5% interest and make more retained value from them than the leases. It is entirely up to the customer to select their preference. So far the uptake of MyPower loans is about 15%. It makes no practical difference to the performance of the company.

 

[traxila]

Seems like SCTY got hammered harder than any major co that 'missed'. And that is after it had already taken a 40% haircut. Hard to make sense of this. Does their retained value figure mean anything? Buying calls at 37 seemed like a real bargain. Well... Falling knife and all that.

25% loss after they essentially eased up to do wall street's bidding. I guess let the big players load up at cheap prices. They'll probably pump to 50 in now time. Question, when is that cheap price. Hard to imagine this is a bottom.

 

[aznt1217]

Seems like SCTY got hammered harder than any major co that 'missed'. And that is after it had already taken a 40% haircut. Hard to make sense of this. Does their retained value figure mean anything? Buying calls at 37 seemed like a real bargain. Well... Falling knife and all that.

25% loss after they essentially eased up to do wall street's bidding. I guess let the big players load up at cheap prices. They'll probably pump to 50 in now time. Question, when is that cheap price. Hard to imagine this is a bottom.

This movement is just due to short term bearish traders. I was pretty surprised when I saw recent institutional movement. New positions are up significantly over those who left positions. To me, this is a pretty good sign. There will also be an investor conference on Nov. 10 at RW Baird where I suspect there will be much more intense deeper dive questions where the big money makes their decisions.

I interpreted the downward revision of growth as a quality control and company health play to avoid raising another round of capital. SCTY has been on "reckless growth" mode for a while and I think they are starting to realize the quality and quantity trade off and how important ramp up is.

SolarCity Corporation (SCTY) Institutional Ownership & Holdings - NASDAQ.com

 

[theschnell]

Not really. We already have loans on our cars and house and don't want another one. What I do want is to go solar today (because I understand what's going on with our environment and solar is the better choice) and have the monthly payments the same or lower than my utility bill. I could care less who owns the hardware, I just want to get my energy from a sustainable source and it's obvious others think this way too. I mean, that's what it's all about, right? If SolarCity hadn't come along, the industry wouldn't be as far along as it is now.

Now, do I use SolarCity? No, I'm still unsure about the escalator in years 10-20, otherwise I would have already had them on my roof. So don't act like it's a ridiculous business model.

In bold above is why I don't own Solar City. If I am unwilling to get the product the way most people are getting it, then I am hesitant to buy the stock of a company providing something that I wouldn't do myself. That's my bear case on Solar City and the reason I don't own it.

OTOH, at these prices, I'm starting to become more interested. What I want to know is how many of Solar City's customers won't care about the future price increases because they don't even take the time to realize how much more they are paying over conventional power, assuming conventional power has lower price increases than Solar City, and at some point in the future, Solar City's customers are paying more to Solar City than they would to their utility? Obviously, no one can give a definite answer to that. Only time will tell. But it sure does seem like you can buy a ton of "guaranteed" future cash flow for a really low price right now... Any further insight on how much of a discount the stock is right now in light of its future cash flows would be appreciated. I have not looked into Solar City very much at all, which is probably pretty obvious by this post...

 

[electracity]

Well, I'm long at 28.42.

 

[SBenson]

Well, I'm long at 28.42.

wow

 

[MikeC]

Well, I'm long at 28.42.

wow

Can we get an explanation on this one?

 

[dalalsid]

wow

seconded. I might have to use margin for the first time if electracity is long!