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Solar City Stock
Old 12-06-2014, 07:10 AM   #1
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Solar City Stock

Although my portfolio is made up mostly of index funds I do have some extra cash I like to use for buying and holding stocks I think have a good long term future. I have been looking at Solar City lately and was wondering if anyone here holds the stock or has thoughts on it. Thanks in advance.

Recently article.
SolarCity (SCTY) Stock Surging Today on New Walmart Project Deal - TheStreet
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Old 12-06-2014, 07:48 AM   #2
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A highly speculative stock in my view.

Negative cash flow, most years are loss making. Revenue is going up, but is there any garantuee that there will be profitable revenue at some point in the near future? It seems in addition that name recognition lifts the stock up somewhat too.

I see the game they are playing: spending 336m on SG&A in the last twelve months is more than their revenues TTM (231m), so continued rapid expansion after which to establish profit is obviously the goal.

To reverse engineer the current valuation: assuming a P/E of 20, with a market cap of 5 billion or so they should make 250 million in net profits. If they can achieve a net margin of 10% (after tax) that means the market 'believes' they will hit 2.5 billion in sales pretty soon. That means expanding to > 10x current sales.

Also, not sure what drives the underlying profitability, but I would guess it's mostly solar panel costs, regulation (incl. subsidies) and electricity prices. All three are highly uncertain.

All in all, you are buying a promise and an expectation, not what actually is. A lottery ticket really.

Now, I wish the company much success as I like what they are trying to do but wouldn't invest in it myself at current prices.
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Old 12-06-2014, 10:06 AM   #3
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The PV industry is saturated , from manufacturers of panels & inverters, to the installing contractors, both large and small. Nobody has a silver bullet on technology. Any significant growth would come from large commercial projects , like the Walmart projects, and electric utilities who need to add " renewable's " for regulatory compliance. And Walmart really gets the prices down to the bone from all vendors, including those who build facilities. Even with the push to eliminate electrical generation from coal, I just don't see a huge spike in electric rates to spur solar PV demand.Solar City does so much radio advertising , I'd invest in broadcasters first.

We have a small, old, off grid system, stripped off an old motorhome, run some lights and small loads , also has batteries , serves as a very small emergency backup. Not planning to add anything more.

As always, my 2 cents.
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Old 12-06-2014, 10:20 AM   #4
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Here's something else worth considering according to Bloomberg.

Tesla Batteries Might Be The Next Big Threat To Electric Companies – Consumerist
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Old 12-06-2014, 11:19 AM   #5
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I am not interested in Solar City or Tesla, but I am all after Space-X when Musk lets us in on it.
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Old 12-06-2014, 10:15 PM   #6
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Quote:
Originally Posted by Chuckanut View Post
Here's something else worth considering according to Bloomberg.

Tesla Batteries Might Be The Next Big Threat To Electric Companies – Consumerist
Musk and Tesla have been suggesting a business of re-purposing used LI cells from tesla cars that still have life, but not good enough for automotive use as grid storage,IIRC , buying cheap power off peak, then using or selling back at peak times.

I don't buy the economics of new LI battery cells for stationary power, and fossil fuel electricity is still quite cheap IMO.

PV plus Wind plus off peak from the grid might work economically. LI would not be a first choice for stationary power , other battery types are more economical for this purpose.

Tesla must be working some angle for tax credits & carbon offset credits for this facility , just like they do with the elec auto sales. Without those , that model S would likely cost well into 6 figures.

Just my opinion
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Old 12-07-2014, 11:08 AM   #7
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Quote:
Originally Posted by Fermion View Post
I am not interested in Solar City or Tesla, but I am all after Space-X when Musk lets us in on it.
He'll probably only do that at the earliest once a stable re-usable rocket has been developed, with a manned version to boot. And with commercial applications dominating his client portfolio (vs. government right now).

I think he even implied at one point he'll only give up control once he has regular manned mars missions going on.

That would be probably be 2030 at the earliest then. I would expect him to have divested completely Tesla & Solar City by then too.
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