I'm not a big fan of Groupon and the marketing avenue here doesn't fit well with my concept of Solar implementation and 'deals' - not sure currently what to make of this
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I'm not a big fan of Groupon and the marketing avenue here doesn't fit well with my concept of Solar implementation and 'deals' - not sure currently what to make of this
Perhaps unfairly, I associate Groupon offers (and similar) as a sign that demand is lagging for the product. Why else offer discounts? Restaurants might offer discounts to get people in once, looking forward to repeat business. SCTY won't see repeat business (but perhaps they do get some referrals this way). I don't think this reflects well on SCTY trends.
I guess sales are sales; but I'm in the same camp as Robert on this one. You don't see the sales not happening due to image and marketing channel directions. Maybe it's just an add and no other effect, but I don't view this as a sign of plentiful marketing channel options. I like the Home Depot angle (and anything similar - like builder channels etc.) - This doesn't strike me well. I'm maintaining a small long position as a hedge against China tariff issues (given the module agnostic business position)- but not looking to increase from that without more clarity on market channels to customers in all states (regardless of incentives), and a stronger defense of new REIT status of Solar which provides low cost buy-lease monies that potentially erode SCTY margins.
I agree with you two, and I would not want my business to be associated with Groupon. People associate Groupon with businesses that are struggling financially, or in desperate need for demand growth. Not saying this is right or wrong, but that is what people think. The stock went down 3% on the day this deal was announced while other solar stocks were slightly in the green. Nothing good will come out of this deal, and I think it is really bad PR for SCTY.
The average person, who doesn't understand solar will not want to buy a system from a solar company that sells on Groupon. The only people taking advantage of this deal are those that already knew SCTY and were going to buy a system from them anyway.
and maybe that's the best indication SolarCity should not be. There is no further distance I can think of outside MacnDons BurgerWorld
Macy's, Nordstrom, Target, Toy R Us, Sephora, Best Buy are all on Groupon, I really don't see anything wrong with Solarcity teams up with Groupon.
Besides, if demand is lagging, why did they give out a 100% growth 2015 target?
NigelM
Recovering Member
Valid question. But equally valid to ask if demand is so good why give out discounts?
My guess would be that the Groupon deal was either a poor marketing decision or a test for the future.
My country club went on groupon one day, and some people that were considering joining the club dropped out after they saw the groupon add. They immediately assumed that the club is in financial trouble (it isn't) so they did not want to pay a big initiation fee to lose it if the club goes out of business.
Management of the CC wanted to sell 1-day memberships in hopes of increasing membership count. Exactly zero people signed up for a membership after using the groupon.
I am not even sure if management really thought that someone would sign up. I think that they wanted to sell a couple hunder 1-day memberships in order to get an extra $20k in revenue. In the end it probably cost them $100k+ because of the people who wanted to join, but didn't as the groupon ad scared them off.
You should not use groupon to sell luxury, high end, or other expensive items. It will probably do more harm than good.
Best case is SCTY down 3% when they announced deal while other solar stocks were positive.
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I see Groupon as an online Outlet Store for retailers running sales and specials. That conflicts heavily with a long term lease of a 'permanent' attachment to my home of which I need education, options and relationship building. Just doesn't feed well with the market from my seat and works to diminish the brand more than add potential sales. Would be like if they decided to open a Telemarketing center and start calling people or if a home builder started offering Groupon for new home discounts (both extreme examples to make a point I guess). And to your point I don't understand the necessity for it if they are expanding 100% as stated. It gives me pause that this is one of the channels that created that projection and if so, it's validity diminishes in my mind. Residential Solar won't reach 'Groupon commodity' relationships for decades imo. It's my respect for SolarCity management that gives me pause- because I believe they know this too and yet prioritized this for some reason I don't understand. Maybe it's my deficiency, but it concurrently lends credence to 'get-the-customer-anyway-you-can' characterization (something the lease issue will also have to contend with at some point and this doesn't help that). If they can offer a discount through Groupon (as a marketing fee), I'm not getting their best price outside that channel (as a customer), so I'm not attaching a trust relationship when needing they're honest evaluation of my 'permanent' buy-lease and other options. Residential Solar is just not a commodity- by the time it is, I plan to be rich on the stock investments- and I'm not there yet
$400 is the same amount they used to gave out for referral, so not exactly a discount from Solarcity's perspective. Solarcity on groupon is more like a indication that Solar goes mainstream.
and maybe that's part of the issue- It's not mainstream. That's what SolarCity wants and needs it to be. But the hard educational work to get it there should be the priority imo. Be branded for that instead- Then the discounts mean something; right now they convey a different message. They need to build the SolarCity trust brand and this is antithetical to that
DaveT, Very much appreciate your thorough and balanced analysis. Given that the stock is beaten down so much from it's all-time-highs, I suspect it might be a great opportunity to invest now. Could you please share your pricing model(s) and targets? Will truly appreciate it, as you have done a lot of homework I will have quite a bit of respect for what you say. I'm looking in a long term perspective by the way, more in 5+ year time frame (and can potentially wait even 10 or 15 years if this is anything like Tesla). Thanks, Steve
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I haven't thought about SCTY a lot in recent weeks. Most of my investing focus is on TSLA. But here are some quick thoughts on SCTY stock pricing model for the future.
1. I'd recommend reading the Jan 14 Deutsche Bank report and their pricing model. It's not that intuitive to understand but it gives you an idea of how institutions are viewing SCTY and their business model, revenue, growth, etc.
2. For a 4-5 year pricing model, I personally use something very rough. In contrast, with TSLA I'm able to forecast (personally) the number of units sold, gross margin, expenses, profit, etc and I'm able to attach a multiple to which I think investors might give depending on the mood. For SCTY, I have a much more difficult time with this kind of traditional analysis as SCTY's business model is not a simple "sell a product one-time and make % profit" model. It's more akin to a services/subscription business model where SCTY is selling a monthly subscription to energy and eventually as they have more monthly subscribers they will be able to make more and more profit. However, the tricky part is that most subscription services don't make much money initially because they don't have economies of scale and their expenses are high. This is the case with SCTY. Currently, they're in rapid growth mode (100% growth every year) and their expenses are naturally high since their investments in growth are high. Thus, it's unreasonable to expect SCTY to make a healthy profit right now, while they're still in scaling and high growth mode.
So, if we look out 4-5 years, SCTY has a 1 million customer target. Let's say you're a believer in SCTY reaching that goal. Then, you can ask yourself how much is each customer worth? (ie., present value of future earnings per customer) You can then use that to come up with a rough price target (calculate market cap of company by either calculating net present value of future earnings factoring in growth beyond 1m customers, or by calculating a potential earnings amount with 1m customers and times that by a health multiple depending on what growth rate you assume they'll have then).
I won't give my specific values because I don't have time to defend them here and it's more of a personal exercise for me. But let's say you calculate that each customer is worth $5,000 to SolarCity in earnings (discounted to net present value), then 1 million customers would equal $5b. However, if SCTY reaches 1 million customers in 4 or so years, then that means they would be growing aggressively and you would need to factor in much more than the 1 million customers to figure out a valuation. I'd say you'd have to figure probably 3-5m customers into the valuation, giving SCTY a $15-25b market cap (but that would change depending if you adjust up or down the initial $5k/customer earnings amount).
Calvin.K
Member
SolarCity has signed an agreement to acquire Silevo, a solar panel technology and manufacturing company whose modules have demonstrated a unique combination of high energy output and low cost. Our intent is to combine what we believe is fundamentally the best photovoltaic technology with massive economies of scale to achieve a breakthrough in the cost of solar power. Although no other acquisitions are currently being contemplated, SolarCity may acquire additional photovoltaics companies as needed to ensure clear technology leadership and we plan to grow internal engineering significantly.
We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team. At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity.
Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.
SolarCity was founded to accelerate mass adoption of sustainable energy. The sun, that highly convenient and free fusion reactor in the sky, radiates more energy to the Earth in a few hours than the entire human population consumes from all sources in a year. This means that solar panels, paired with batteries to enable power at night, can produce several orders of magnitude more electricity than is consumed by the entirety of human civilization. A cogent assessment of sustainable energy potential from various sources is described well in this Sandia paper:www.sandia.gov/~jytsao/Solar%20FAQs.pdf.
Even if the solar industry were only to generate 40 percent of the world’s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world’s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.
http://blog.solarcity.com/silevo/
We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team. At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity.
Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.
SolarCity was founded to accelerate mass adoption of sustainable energy. The sun, that highly convenient and free fusion reactor in the sky, radiates more energy to the Earth in a few hours than the entire human population consumes from all sources in a year. This means that solar panels, paired with batteries to enable power at night, can produce several orders of magnitude more electricity than is consumed by the entirety of human civilization. A cogent assessment of sustainable energy potential from various sources is described well in this Sandia paper:www.sandia.gov/~jytsao/Solar%20FAQs.pdf.
Even if the solar industry were only to generate 40 percent of the world’s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world’s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.
http://blog.solarcity.com/silevo/
Finally a smart move from SCTY. I have been arguing that the model of buying panels from competitors is not a good one since demand is going to outstrip supply in the very near future and probably stay that way for years to come.
I think that this is a great move for SCTY, but don't like how they bash others for producing "relatively low photonic efficiency solar cells at uncompelling costs." Very unprofessional for someone to criticize a whole industry before even making one single product themselves...
And then I read about the efficiency of the silevo cells and they "may be" able to reach sunpower levels of 24%. This is a good move. Should have called "one of the single largest solar panel production plants in the world" the solar Gigafactory
The style of the blog post hints strongly of Elon's involvement. It even lists his name first as the author. That may explain the critical comment.
I like this move A LOT. Also, the fact that Elon is actively involved is a good sign for SCTY investors, especially those who are "investing in Elon".
I like the move a lot too, just not a big fan of the trash talking before they even played one game in the league...
I am sure that they will do a good job of running down costs, but by the time they get up and running the rest of the world will be producing panels a lot cheaper too. Manufacturing in New York will make it tough to compete on price as well.
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