I trade the range in both TSLA & SCTY with <10% of my equity portfolio (using Bollinger Bands - buy at the bottom & sell at the top band). For me technicals are more important than valuation for super-growth momentum stocks like these. When they settle down (ie are no longer momentum stocks) I will hold in a core long term investment position.
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killer_model_s
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We've bought a Jan 15 put with $75 strike about 2 weeks ago (see my twitter feed @hedgesauce). You don't always time it perfectly but in this case we really did (simply luck). The investment thesis is that its simply nonsensical for this company to trade at 40+ times sales based on the fact that:
1) Legislation change in 2017 will force SCTY to forego a significant revenue stream (i.e. they can't pocket the gov rebates when they lease anymore)
2) Earnings growth is vastly overstated and does not reflect growth potential
3) The earnings that were restated twice raised a huge red flag
4) People who think that TSLA's gigafactory may somehow benefit SCTY don't understand shareholder laws. TSLA has to bid this contract out and can't just give it to SCTY. There's a huge conflict of interest there and a class-action waiting to happen.
5) This is AT BEST a $1Billion dollar (market cap) company right now
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I agree 100%. Forget financial modeling for SCTY, DDD, SSYS, or any other of these momentum plays as they trade purely on news and momentum and any attempt to value these companies in a traditional way will fail.
1) Legislation change in 2017 will force SCTY to forego a significant revenue stream (i.e. they can't pocket the gov rebates when they lease anymore)
2) Earnings growth is vastly overstated and does not reflect growth potential
3) The earnings that were restated twice raised a huge red flag
4) People who think that TSLA's gigafactory may somehow benefit SCTY don't understand shareholder laws. TSLA has to bid this contract out and can't just give it to SCTY. There's a huge conflict of interest there and a class-action waiting to happen.
5) This is AT BEST a $1Billion dollar (market cap) company right now
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I agree 100%. Forget financial modeling for SCTY, DDD, SSYS, or any other of these momentum plays as they trade purely on news and momentum and any attempt to value these companies in a traditional way will fail.
Teslafan123, I agree with your analysis. I think the only assumption that some are caught up on is lease/ppa vs. buying a system. Solarcity's retained value is heavily weighed on 20-30 year lease agreements. If customers purchase rather than lease, then retained value might stagnate or go down, since Solarcity is currently taking a loss on each system sale. Some analysts have pointed out that Solarcity is reporting a slowing in lease/ppa growth and system sales are growing. Therefore, they are worried that overall future growth is slowing and retained value(the measure of company value) will shrink. Thus, the growth premium built into the current stock valuation gets discounted.
However, I feel these analysts haven't committed to the possibility energy storage(as you've pointed out) will have on the lease/ppa equation. Most, maybe all, PV systems will be leased with energy storage. I have a feeling they will strive hard to develop it as $0 lease product as well. With this product, I feel growth in lease/ppa is still there. As a matter of fact, it might accelerate since no other competitor will offer a better product, zero down loan or otherwise.
I understand that energy storage isn't there today, and zero down loan is an enticing option for long term savings for some future users of solar right now, but I also understand the majority of potential residential buyers just want cheaper energy now. They don't want to worry about PV system production or maintenance or home owner's insurance claims if something goes wrong... they just want to get that lower bill at the end of the month. With zero down leases, there is still a payback period where payments are tied to how much you currently pay on your utility bill (or even more) so you don't see a lower bill now... you'll have to wait 3 or 4 years for a lower bill, and when when the 30% ITC goes away in 2017, buyers at that point might have to wait 7 to 8 years for a lower bill... and still have to worry about paying labor cost on warranty fixes, go through insurance claims if natural disaster damages the system, etc... In addition, when you purchase, production will go down over the life of the warranty. There are no 20-30 production guarantees like in a Solarcity lease agreement. This is important if you choose to sell your dwelling, since production is what is valued in a home sale, not the system itself. And for those worried about the new owner not wanting to sign a Solarcity lease, Bob Kelly in his recent ROTH conference presentation a vast majority sign onto a Solarcity lease. He stated that only 1 system has been taken off a roof out of all Solarcity residential customers in its history. That's a great track record, IMO.
In all, I think leases/ppa's will continue to grow today, and in the post 30% ITC world of 2017 and beyond... energy storage will only accelerate lease/ppa contracts. Therefore, retained value, which is the measure of Solarcity's value, will have strong growth going into the 2018 1mln customer goal time frame. I actually feel Teslafan123's six bagger prediction is low, since by 2018, I feel solarcity will set a 3 mln customer+ goal by 2020 which will add to the growth premium investors will be willing to pay... To me, there are a lot of other catalysts along the way that will prove Solarcity a strong power utility company, but that will have to wait till another time maybe
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Forgot to add, if Solarcity creates a PV+storage $0 lease product in the near future(which I think they will), it will negate the net metering losses that might come down the pike if utilities play hard ball and cut them down/out in their up coming rate reviews. Also, if Solarcity soon goes completely Solar ABS for capital needs (as opposed to tax equity), then the 30% ITC reduction will have no effect on Solarcity business operations. As a matter of fact, cutting out tax equity will only increase retained value since the money going to tax equity investors goes directly back to the company(shareholder). To me, the problem of reduced net metering and 30% ITC is squarely on the entire solar industry with Solarcity being the exception. How will the rest of the residential solar industry survive given this coming reality? How do you measure that in your "modeling" equations for investment?
However, I feel these analysts haven't committed to the possibility energy storage(as you've pointed out) will have on the lease/ppa equation. Most, maybe all, PV systems will be leased with energy storage. I have a feeling they will strive hard to develop it as $0 lease product as well. With this product, I feel growth in lease/ppa is still there. As a matter of fact, it might accelerate since no other competitor will offer a better product, zero down loan or otherwise.
I understand that energy storage isn't there today, and zero down loan is an enticing option for long term savings for some future users of solar right now, but I also understand the majority of potential residential buyers just want cheaper energy now. They don't want to worry about PV system production or maintenance or home owner's insurance claims if something goes wrong... they just want to get that lower bill at the end of the month. With zero down leases, there is still a payback period where payments are tied to how much you currently pay on your utility bill (or even more) so you don't see a lower bill now... you'll have to wait 3 or 4 years for a lower bill, and when when the 30% ITC goes away in 2017, buyers at that point might have to wait 7 to 8 years for a lower bill... and still have to worry about paying labor cost on warranty fixes, go through insurance claims if natural disaster damages the system, etc... In addition, when you purchase, production will go down over the life of the warranty. There are no 20-30 production guarantees like in a Solarcity lease agreement. This is important if you choose to sell your dwelling, since production is what is valued in a home sale, not the system itself. And for those worried about the new owner not wanting to sign a Solarcity lease, Bob Kelly in his recent ROTH conference presentation a vast majority sign onto a Solarcity lease. He stated that only 1 system has been taken off a roof out of all Solarcity residential customers in its history. That's a great track record, IMO.
In all, I think leases/ppa's will continue to grow today, and in the post 30% ITC world of 2017 and beyond... energy storage will only accelerate lease/ppa contracts. Therefore, retained value, which is the measure of Solarcity's value, will have strong growth going into the 2018 1mln customer goal time frame. I actually feel Teslafan123's six bagger prediction is low, since by 2018, I feel solarcity will set a 3 mln customer+ goal by 2020 which will add to the growth premium investors will be willing to pay... To me, there are a lot of other catalysts along the way that will prove Solarcity a strong power utility company, but that will have to wait till another time maybe
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Forgot to add, if Solarcity creates a PV+storage $0 lease product in the near future(which I think they will), it will negate the net metering losses that might come down the pike if utilities play hard ball and cut them down/out in their up coming rate reviews. Also, if Solarcity soon goes completely Solar ABS for capital needs (as opposed to tax equity), then the 30% ITC reduction will have no effect on Solarcity business operations. As a matter of fact, cutting out tax equity will only increase retained value since the money going to tax equity investors goes directly back to the company(shareholder). To me, the problem of reduced net metering and 30% ITC is squarely on the entire solar industry with Solarcity being the exception. How will the rest of the residential solar industry survive given this coming reality? How do you measure that in your "modeling" equations for investment?
I am not against SCTY, since I think that the company can do really well in the future. What I am against is that I read a lot about people blindly investing in SCTY without understanding anything about the business model or valuation of the company. I don't want to see you guys lose your shirts, because you haven't done your due diligence. I haven't done mine, so I am staying away from SCTY for that reason; I am not against the company or stock, I simply do not know how to value it or what it is worth so I am asking these questions to give you guys something to think about.
I already have TSLA for my high flying growth momentum dominate the world type of play so I don't need SCTY. SCTY has just gone from $88 to $58 in just a few short trading days; which is a 34% loss. If we were to hit a hard recession in the near future I wouldn't be surprised to see SCTY trading in the teens again. Yet, I read about people who are buying July $100 call options...seriously? Maybe it gets there with momentum, but that puts their market cap at $8.3b which is ridiculous at this point in time.
I am asking all of these questions not because I want to instill doubt into SCTY, but because I am hoping that one day somebody here makes an effort to research the topic and try to answer these questions; and nobody ever seems to try to answer any of them, probably because it is way too hard to understand their business model.
SCTY's business model also has tons of risks that could severely impair their ability to grow at a quick pace. They may as well navigate around all of these risks without a hiccup, but I never see anyone (but me) point out these risks.
The only thing I have against SolarCity is that they are a middleman that is exploiting an uneducated consumer base and seeking economic rent for it. I don't think that the company creates any real value by offering solar systems for lease. They have deep pocket friends, i.e. Goldman Sachs and others, that also decided to get in on exploiting the uneducated consumer for their profit (this holds true for all leasing companies including SPWR, RGSE, Sungevity, etc.).
Goldman Sachs needs to make its profit on the system and so does SCTY. This is money that is coming out of the customers pockets. I don't like the leasing or PPA business model, because you are still paying money to a utility, in this case called SolarCity. Buy your own system and be your own utility to reap the whole benefit of having a solar system on your roof. Don't let SCTY or someone else take the money that you deserve. There are plenty of financing options out there.
Some of these examples that people gave out at ~$0.04/kWh are not available anymore. SCTY used to offer those, because it wanted to grow market share at any cost and those deals are going to lose money for them going forward. Their new lease offers are not attractive at all.
Someone here mentioned that he is an Oncor customer, and maybe he got a good deal a few years ago when SCTY was handing out awesome deals, but today you would not get a good deal.
I challenge anyone here who lives in the Oncor delivery service area in TX to get a quote from SCTY and see if you can beat my deal (granted I got a great deal, but I am certain that you can find a similar priced deal by using a local installer and inferior panels such as the ones that SCTY uses; I got SPWR panels FTW). After Oncor rebate and 30% tax credit, I am paying $9k out of pocket for a 7.68 kWh system after including all applicable costs, sales tax, etc.
SCTY is a great stock, but I would recommend doing a lot more research into the company before investing. I am worried that a lot of people might try to jump on the SCTY bandwagon now at high valuations without doing the DD. If you got in early as a "play on Musk" when it was still cheap then you made a very smart investment decision last year. But at these current valuations I would recommend being a lot more cautious.
At these SCTY valuations you have build out a spreadsheet to model the companies financials to see where they are going to be 5 years from now in order to make a sound judgement on whether you are getting shares at a good price or not.
Sleepyhead, you, yourself, say you haven't done the due diligence on Solarcity, so how can you make any recommendations to others by this regard? By putting out questions and being frustrated no one answers the way you want doesn't count as due diligence either(correct me if I'm wrong on that conclusion).
If you look at prior "post-earnings drops" most have seen a 36% fall in share price from the high. However, in just a year and a half, the stock has gone from about $9 to currently about $62. I have a feeling most people on this forum are long term investors with a core share holding, so the currently volatility (although nerve-racking) is not of primary concern. Long term stock appreciation is.
In a prior post, on a different thread, you've insinuated that Solarcity is doing unethical business. It's hard for me to believe you think it's a great company if this is the case. I guess, I'm a little confused with your position here. I know you do a lot of research and many people follow your investments, so it's only fair to request that you do the same research and level analysis with Solarcity if you are going to advise people to "not invest blindly" and "lose our shirts" on Solarcity.
If you look at prior "post-earnings drops" most have seen a 36% fall in share price from the high. However, in just a year and a half, the stock has gone from about $9 to currently about $62. I have a feeling most people on this forum are long term investors with a core share holding, so the currently volatility (although nerve-racking) is not of primary concern. Long term stock appreciation is.
In a prior post, on a different thread, you've insinuated that Solarcity is doing unethical business. It's hard for me to believe you think it's a great company if this is the case. I guess, I'm a little confused with your position here. I know you do a lot of research and many people follow your investments, so it's only fair to request that you do the same research and level analysis with Solarcity if you are going to advise people to "not invest blindly" and "lose our shirts" on Solarcity.
Sorry, I disagree with this bit. Not everyone can lay their hands on ~$10k of cash to purchase their own system. And those people, if they own their own (probably underwater) home, might have trouble qualifying for a home equity loan too. But because the collateral is good, they can finance the system through Solar City and still save $100/month (or whatever) on their power bill. The biggest problem is getting the possible customers to believe that they can save money with $0 down, and the money is coming out of the utilitys' pocketses. Even I admit it sounds like a scam. I do agree that if you can finance it yourself, you're better off... just not everyone can.
In various contexts I learned that SolarCity actually started by selling systems. Only later to increase the size of addressable market they went to the financing model. I believe Musk mentioned in the Tesla Financing call or in the subsequent call as well. As many people pointed here you can always buy a system outright from SolarCity, they always give the option to the consumer. People are voting with their money and 20 year contracts which model they prefer.
This is from the latest presentation: "Our U.S. Residential Solar Market Share Was the Equivalent of the Next 14 Competitors Combined in the Most Recent Data Available for Q3 2013". Their market share grew from 12% in Q1 2012 to 33% as of Q3 2013!
If their business model is so poor why are they growing the rate at which they are growing? They have grown at 100%+ rate over last 7 years straight. Do you honestly think all other consumers are just stupid to give into SolarCity somehow? What's the obligation on the consumer side?
Let me give you a counter example. Due to my circumstances and preferences, I will not buy a Model S or an X, and even a Gen-3 I will consider buying after it's second iteration in 2021 or later. Should that make TSLA a bad investment for me? It's not about what I prefer, it's about how many people prefer buying what Tesla is selling. It's good to get over yourself sometimes!
If you are really concerned with the question of why people would prefer taking leases instead out right system purchases, you should watch the ROTH presentation at investors.solarcity.com.
Correct me if I'm wrong, Sleepyhead, but I recall you stating you had one share of TESLA and are heavily invested in JASO. I understand you're still a shareholder, however to claim this as your "high flying growth momentum dominate the world type play" is a bit overstated, don't you think? And to be invested in JASO, which I've learned from your numerous posts in the "former SCTY" thread makes me feel you're understating your "high flying growth momentum" plays since JASO is exactly that, IMO. Again, I'm pointing these discrepancies because I only expect the highest level of forthrightness from a forum contributor that commands such respect in his researched opinions on various equities, but seems to fail mightily when it comes to knowledge on SCTY...
Here are just a few -- and I mean a few -- examples of drivers of growth for years to come already "in the bag," sort of speak, to enable Solarcity to reach that 1 mln customer number soundly (and potentially a lot sooner) from a short cursory research review...
Long term military contract...
--SolarCity's SolarStrong initiative, a five-year plan to build more than $1 billionin solar projects to provide power to up to 120,000 military homes in the United States by 2018. That's 120,000 contracted residential roof top installations into 2018.
Long term Utility partnerships in effect now...
--Viridian Energy will offer SolarCity products and services beginning in its New York, New Jersey, Connecticut, Massachusetts, Maryland and Delaware markets. Solarcity will have exclusive access to Viridian's currently more than 230,000 customers in the U.S.
--Direct Energy and SolarCity have undertaken a broad agreement to provide solar electricity directly to businesses. Solarcity will have exclusive access to Direct Energy Business's 180,000 commercial and industrial [FONT=Arial, Helvetica, sans-serif]customers in 14 states.
In just these three examples alone, they have a strong probability of gaining over 500k new customers over the coming few years... and that was achieved before Paramount Solar came on board late last year, imagine what this number will look like now that Paramount customer acquisition machine is in full swing with the doubled operational capacity increases obtain through the Zep purchase...
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Long term military contract...
--SolarCity's SolarStrong initiative, a five-year plan to build more than $1 billionin solar projects to provide power to up to 120,000 military homes in the United States by 2018. That's 120,000 contracted residential roof top installations into 2018.
Long term Utility partnerships in effect now...
--Viridian Energy will offer SolarCity products and services beginning in its New York, New Jersey, Connecticut, Massachusetts, Maryland and Delaware markets. Solarcity will have exclusive access to Viridian's currently more than 230,000 customers in the U.S.
--Direct Energy and SolarCity have undertaken a broad agreement to provide solar electricity directly to businesses. Solarcity will have exclusive access to Direct Energy Business's 180,000 commercial and industrial [FONT=Arial, Helvetica, sans-serif]customers in 14 states.
In just these three examples alone, they have a strong probability of gaining over 500k new customers over the coming few years... and that was achieved before Paramount Solar came on board late last year, imagine what this number will look like now that Paramount customer acquisition machine is in full swing with the doubled operational capacity increases obtain through the Zep purchase...
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sleepy wrote that Solarcities business model is hard to understand. And he said that he finds it unethical.
He didn't say it is a bad business model. It seems to allow SCTY to expand its market share, so at least for SCTY it's a good business model. He didn't say it's a bad business model for the customers. As ggr pointed out, SCTY opens the possibility to go solar for home owners that couldn't buy or finance a solar roof otherwise, then save $100 every month on their utility bill. I'd consider that a good thing.
sleepy only says that it might prove unwise to jump on SCTY stock with both feed. As in, "Hurray, another Musk enterprise!". As long as no due diligence is posted here, analyzing SCTY's business models in depth, answering the questions that were raised, and projecting finances for 3-5 years to come, it is just gambling.
He didn't say it is a bad business model. It seems to allow SCTY to expand its market share, so at least for SCTY it's a good business model. He didn't say it's a bad business model for the customers. As ggr pointed out, SCTY opens the possibility to go solar for home owners that couldn't buy or finance a solar roof otherwise, then save $100 every month on their utility bill. I'd consider that a good thing.
sleepy only says that it might prove unwise to jump on SCTY stock with both feed. As in, "Hurray, another Musk enterprise!". As long as no due diligence is posted here, analyzing SCTY's business models in depth, answering the questions that were raised, and projecting finances for 3-5 years to come, it is just gambling.
1. Speculative stock for me when I bought in
2. Speculative
3. No model
4. Bull market, short term investment, small risk
5. I got in at approx. 20 (don't remember exactly), got out when it doubled after very short time. I thought at a time that Tesla was a better speculative opportunity so I sold to buy more TSLA.
6. I prefer leasing to owning, just a personal preference. I lease my cars and anything that can be leased as I have less trouble.
7. I am not very diligent investor. Unfortunately my best gains came from highly speculative stocks. I might crash.
8. Likewise, wish you best of luck and make lots of money! Don't crash.
I don't have time to respond to everyone's reply to my comment, but I would like to ask that if you ask me for my opinion and don't like what I have to say; then please don't be rude towards me (comment has since been edited, but not before I was able to see it)
This is the perfect example of why I am against the lease model. 0.03/kWh is about what you should be paying (if you prepay the whole thing), but if you lease with $0 down then you are paying $0.08/kWh, where SCTY and Goldman Sachs gets 0.05/kWh to keep for their own pockets. The consumer is getting $0.03 of value and paying $0.08 (167% inflated price) for it.
Couple other random replies to comment aimed at me:
- I have 1 share of TSLA, but a ton of options; mostly J16 LEAPS
- Would you rather buy a car for $10k with a 5 year warranty or sign a 10 year lease for $20k for that exact same car with a 10 year warranty? This is exactly what the SCTY lease option looks like. After 10 years you have to give the car back, but if you bought it outright then it could still drive 15+ years; all while paying 50% less.
- There are many ways to finance a solar system. I got a 3% 5-year loan from a credit union for mine. Those may be hard to find, but you can easily get 4%-6% financing. You can even borrow against your 401k and pay interest to yourself.
- SCTY is in an ethical dilemma, because they have an economic incentive to jack up the price of a system to squeeze the most subsidies out of the government. I called out SCTY as being unethical due to a very specific example that someone here posted in regards to battery storage and still stand by that comment. The situation was that someone looked into a 10kWh battery storage unit and SCTY said that it costs $2k, which is ridiculous because that is $2,000/kWh and we know that Tesla makes these batteries for $250/kWh. But then they said that because you are a SCTY customer, you can lease the system for 10 years for $15/month or $1,800 over 10 years. In this case either they are lying to the customer that the system is so expensive to lead them to believe that they are getting a great deal for $1800 on a $21k system. Or the most likely scenario is that they are jacking up the price to maximize government subsidies for battery storage. Either way, they are doing something very unethical in my book!
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I don't think that you are even trying to understand what I am saying here.
I have a very limited amount of time to research stocks and companies, and to me SCTY has a lot of risks and a very complex business model. For that reason it is a non-starter for me and I can't justify putting my research time into this company. Yes, it might overcome all of these risks and prosper, but I can't be bothered to find out what happens if they don't overcome them.
I have a few bull call spreads on SCTY that I created risk free when it fell below $30, so I would like to see them finish at max payout (need SCTY to close above $40 in Jan'15). Those are my only positions in SCTY, so I do not have any incentive to watch the stock go down.
I am not trying to do due diligence on SCTY. I am trying to get everyone else who is invested in the company to do the DD for themselves; that is why I keep asking these questions. I am worried about those who invest in the company "blindly", because nobody has ever tried to come up with a SCTY valuation here. Whereas there are at least 20 different people here who have done such financial projections for TSLA. But not one person tried to do the same for SCTY.
I am worried about you guys for this reason. I keep asking the same questions, not because I want an answer for myself. I ask those questions so that all of the SCTY investors can think about them and try to answer them for their own sake (not mine).
This is the perfect example of why I am against the lease model. 0.03/kWh is about what you should be paying (if you prepay the whole thing), but if you lease with $0 down then you are paying $0.08/kWh, where SCTY and Goldman Sachs gets 0.05/kWh to keep for their own pockets. The consumer is getting $0.03 of value and paying $0.08 (167% inflated price) for it.
Couple other random replies to comment aimed at me:
- I have 1 share of TSLA, but a ton of options; mostly J16 LEAPS
- Would you rather buy a car for $10k with a 5 year warranty or sign a 10 year lease for $20k for that exact same car with a 10 year warranty? This is exactly what the SCTY lease option looks like. After 10 years you have to give the car back, but if you bought it outright then it could still drive 15+ years; all while paying 50% less.
- There are many ways to finance a solar system. I got a 3% 5-year loan from a credit union for mine. Those may be hard to find, but you can easily get 4%-6% financing. You can even borrow against your 401k and pay interest to yourself.
- SCTY is in an ethical dilemma, because they have an economic incentive to jack up the price of a system to squeeze the most subsidies out of the government. I called out SCTY as being unethical due to a very specific example that someone here posted in regards to battery storage and still stand by that comment. The situation was that someone looked into a 10kWh battery storage unit and SCTY said that it costs $2k, which is ridiculous because that is $2,000/kWh and we know that Tesla makes these batteries for $250/kWh. But then they said that because you are a SCTY customer, you can lease the system for 10 years for $15/month or $1,800 over 10 years. In this case either they are lying to the customer that the system is so expensive to lead them to believe that they are getting a great deal for $1800 on a $21k system. Or the most likely scenario is that they are jacking up the price to maximize government subsidies for battery storage. Either way, they are doing something very unethical in my book!
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I don't think that you are even trying to understand what I am saying here.
I have a very limited amount of time to research stocks and companies, and to me SCTY has a lot of risks and a very complex business model. For that reason it is a non-starter for me and I can't justify putting my research time into this company. Yes, it might overcome all of these risks and prosper, but I can't be bothered to find out what happens if they don't overcome them.
I have a few bull call spreads on SCTY that I created risk free when it fell below $30, so I would like to see them finish at max payout (need SCTY to close above $40 in Jan'15). Those are my only positions in SCTY, so I do not have any incentive to watch the stock go down.
I am not trying to do due diligence on SCTY. I am trying to get everyone else who is invested in the company to do the DD for themselves; that is why I keep asking these questions. I am worried about those who invest in the company "blindly", because nobody has ever tried to come up with a SCTY valuation here. Whereas there are at least 20 different people here who have done such financial projections for TSLA. But not one person tried to do the same for SCTY.
I am worried about you guys for this reason. I keep asking the same questions, not because I want an answer for myself. I ask those questions so that all of the SCTY investors can think about them and try to answer them for their own sake (not mine).
callmesam
Member
I just don't see anything unethical in a single word you wrote. Variable pricing . . . talk to the airlines.
There are better deals out there on panels . . . then why aren't people biting? Do you believe in the wisdom of crowds or that Tesla has people at a disadvantage and is "taking advantage" of them?
Isn't this a classic "arm's length transaction". It's true that people could be getting better deals from buying outright, but isn't that true of EVERY SINGLE THING sold, in the Universe?
Cars are a better deal if you buy instead of lease.
Homes are a better deal if you buy instead of lease.
We could keep making lists and the leasing party isn't doing something unethical by leasing . . .
There are two separate issues:
1. You don't understand SCTY's business
2. You don't think their business is ethical.
But it can't be both.
Either you understand their model (and they have a model to make lots of money) and don't think its ethical OR you don't understand their model and you have no opinion on their ethics.
He got the deal at $0.03/kWh and his system was installed in December 2013..
I think, you can still get similar deals from Solar City.. Just wait for good promotions to come up in your area or bargain hard just as if you were to buy outright for yourself.
I don't think you understand what a "high flying growth momentum" stock is.
JASO is going to do close to $2b in sales this year and has a $500m market cap. That is not a high flying growth momentum stock. That is IMO an extremely undervalued company that just happens to be in the fastest growing industry in the world. It is a growth story, but valued like a company that is going bankrupt.
JASO has 0.3x Price to Sales ratio. SCTY's P/S is 100x higher than JASO.
JASO is trading at a discount to book value, which is ridiculous in my opinion.
There is absolutely nothing "high flying momentum" about JASO at all. It is my value play. If it were valued like a growth momentum play then the stock would be at $50+ today.
Lastly, I believe that SCTY will succeed long-term, but that its stock price will follow AMZN: meaning that the stock might even go to $100 - $150, but if we hit a hard recession, I can see it falling all the way back to $20 before eventually growing into its valuation back into the triple digits. And yes, I do understand that JASO would get crushed in a recession as well, but it has a lot less room to fall than SCTY does.
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If you don't see anything unethical in saying that a battery (that costs $2k to make) has a retail price of $20k in order to squeeze as much money from goverment incentive programs (and then sell it for $2000 anyway, even though they claim it costs 10x as much), then I have nothing else to say to you on this topic. I believe that SCTY is or was being sued for jacking up prices to get as much money from the tax payers.
I UNDERSTAND SCTY'S BUSINESS MODEL. I just do not understand how the financials work out, and quite frankly none of you guys do either (maybe DaveT and one or two others do). But I don't invest in the company (other than a minor position), so I don't care to know.
Their business model presents an ethical dilemma.
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Their business model presents an ethical dilemma. And it is due to the way that government incentives are strucutured, i.e. we get a tax credit instead of FIT.
Once the tax credit goes away in 2017, the ethical dilemma will go away too. In the mean time from a financial perspective, the more unethical you get by jacking up the price of the system, the more money you will make.
It is the government's fault and not SCTY's, but it is SCTY who faces this ethical dilemma.
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I already commented on that just before you did, but let me add that 0.03 is about as much as the system should cost.
SCTY offers this upfront option, because it needs cash. If you prepay the whole 20 year lease then you get the 0.03 rate, but you have to pay cash and SCTY does not offer a financing deal on that one. It is important to note that SCTY makes a lot less money if you prepay then if you sign the lease. If everyone took this option then SCTY would have to raise that price, because they would never grow into their $7b market cap.
The problem I have is that a system is worth $0.03/kWh (this coincides closely with my own calculations), but they sell it to you for $0.08 if you sign a $0 down lease.
The reason SCTY is successful is because the customer is paying $0.12/kWh for electricity from the utility company and thinks that he is getting a great deal for 0.08. But the real cost of the system is 0.03.
0.12 - 0.03 = $0.09/kWh and that is the benefit of owning a solar system in the Oncor delivery area. When you lease it from SCTY, you get to keep $0.04 of that benefit, while SCTY keeps $0.05.
If you get a loan to buy a similar system you get to keep all of the 0.09.
You are giving up more than half of the benfit of having a solar system to SCTY and Goldman Sachs.
And yes, the customer is extremely uneducated when it comes to solar. For this reason SCTY will most likely be successful in the future as well. People do not understand solar at all, so all they see is the money that SCTY is saving them and they don't see the money that they are leaving on the table that is going into SCTY's pockets.
Calvin.K
Member
I think, you are making a mistake by saying that Customer is "uneducated" by selecting to lease at $0.08/kWh instead of $0.03/kWh.
At lease all of us (me + my neighbors) are pretty well educated in different disciplines (Lowest degree is mine, I am just a MS in Computer Science :wink
Anyway, For example, in my case + 12 other neighbor's case + in above sanjeever's case, SolarCity was upfront of each options.
They explained Pros and Cons of each options clearly (Buy vs 0 down lease vs Prepay Lease). It was fully our decision whichever way we go.
In my case, I specifically asked, why the difference of cents/kwh for 0 down vs prepay and SCTY was candid in saying that, they need to finance this system and they need to pay interest. He did say, by paying upfront, you are reducing our cost to finance and we are passing that to you in lower price.
I don't think there is anything unethical in SolarCity's business model, because, they are educating customer of all of their options and At least to me, they didn't force us to make a decision one way or other.
It is totally customer's decision and they can decided buy vs 0 lease vs prepay lease according to their personal situation.
I find all this discussion quite fascinating, thank you for getting it going once again. I struggle with this though - I want solar panels, but can't afford the upfront cost. I understand all the options and maybe people who go with SolarCity just want the easiest route to getting panels on their roof instead of having to hassle with a bank. It's one option over another.....
And about people not understanding solar, maybe true, but I don't understand every single part in an engine and I can still drive a car. I've only learned about EVs because technology is a passion of mine and therefore want to understand how they work. But future generations are just going to be buying EVs for their first car like it's a regular thing to do and they won't have to know how it works, so the same thing can be said for solar. If the end result is the same - people using solar, a renewable, then what's the problem with how we get there?
@sleepyhead
I think you are strongly underrating people's perceived value of a lease, and their understanding of "higher costs" associated to a lease model. It is in the consumer's best interest to switch to a lease of around $0.08/kWh with SolarCity vs. paying more than that with their conventional utility company. True, it is MUCH CHEAPER to buy the system outright, but that is to the advantage of those with the capitol to do so. If SolarCity is upfront about the costs of the system on a leasing model vs. an outright purchase, then there's nothing unethical about whom they sell the systems to.
I think you are strongly underrating people's perceived value of a lease, and their understanding of "higher costs" associated to a lease model. It is in the consumer's best interest to switch to a lease of around $0.08/kWh with SolarCity vs. paying more than that with their conventional utility company. True, it is MUCH CHEAPER to buy the system outright, but that is to the advantage of those with the capitol to do so. If SolarCity is upfront about the costs of the system on a leasing model vs. an outright purchase, then there's nothing unethical about whom they sell the systems to.
I think, you are making a mistake by saying that Customer is "uneducated" by selecting to lease at $0.08/kWh instead of $0.03/kWh.
At lease all of us (me + my neighbors) are pretty well educated in different disciplines (Lowest degree is mine, I am just a MS in Computer Science :wink
Anyway, For example, in my case + 12 other neighbor's case + in above sanjeever's case, SolarCity was upfront of each options.
They explained Pros and Cons of each options clearly (Buy vs 0 down lease vs Prepay Lease). It was fully our decision whichever way we go.
In my case, I specifically asked, why the difference of cents/kwh for 0 down vs prepay and SCTY was candid in saying that, they need to finance this system and they need to pay interest. He did say, by paying upfront, you are reducing our cost to finance and we are passing that to you in lower price.
I don't think there is anything unethical in SolarCity's business model, because, they are educating customer of all of their options and At least to me, they didn't force us to make a decision one way or other.
It is totally customer's decision and they can decided buy vs 0 lease vs prepay lease according to their personal situation.
I mean that customers are "uneducated" on solar and not that they are undecated overall. What I mean is that the financials behind a solar system are very complex and require some wicked financial engineering skills to be able to model out the financials of a solar system.
I am not saying that SCTY is unethical. I am sure that their sales people are very nice, forthcoming, and honest. I am just referring to that specific battery example that a TMC member posted; it sounds very unethical to me.
I agree that SCTY is very clear in presenting different options to buy, lease, PPA, or upfront PPA, etc. But they are not telling you how much it costs to buy the exact same system from a competitor. IMO SCTY's offer to buy a system is too high, and encourages you to lease the system from them instead. They are not competitive when it comes to buying systems. E.g. one member here posted a quote from SCTY for a 5kW system and I was able to find him a deal for a 5kW Sunpower system (which is significantly better than a SCTY system) for the exact same price.
If you compare SCTY's lease price to buy price, it might make more sense to lease; and that is what they want from you. But if you compare SCTY's lease offer to a buy price from a local competitor then it is a no-brainer to buy.
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Once again, I am questioning SCTY's ethics when it comes to getting as much out of the government as possible. I am not saying that they are unethical towards customers.
SCTY says that the battery costs $20k to rip-off tax payers and then sells it to the end customer for $2k. That is extremely unethical if this is the case.
The other possibility in this scenario is that SCTY only claims that the battery system costs $20k, and then sells it to the customer for $2k to make him believe that he is getting a smoking deal, when all they did is play the "Kohls" card of huge discounts (that courts have found unlawful in the past).
Either way, SCTY claiming that a 10kWh battery costs $20k is extremely unethical IMO. You can disagree if you want, but you won't change my mind on this one.
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