SolarCity's fourth-quarter earnings report was one of the first in the company's history as a public company that left investors wanting more. Net loss was wider than expected, installations didn't meet their own guidance, and retained value per watt slipped lower for the second straight quarter.
But SolarCity is still a leader in the booming residential solar market, and it's still a high-growth company. Here are the three best reasons to be bullish on the stock.
Still growing like crazy What can't go overlooked for SolarCity is that it's growing incredibly quickly, growing installations to 502 MW last year, and reaching a 39% market share in residential solar. Between 2010 and 2015, installations are expected to double every year.
Source: SolarCity earnings presentation.
That kind of growth rate and market share gives SolarCity scale competitors don't have and the ability to make moves others can't. It bought a racking company last year, it's building a solar manufacturing plant, and it has a variety of financing options to fund projects. This allows them to lower costs and offer products that take advantage of this fast-changing marketplace.
MyPower solar loans are a smashing success One of those new products is the solar loan MyPower, which launched early in Q4 2014 and, by all indications, is a smashing success. MyPower accounted for about one-third of solar bookings in the quarter and was so successful in California that interest rates were raised from 4.5%-5% to a range of 5%-5.5%.
I've written many times before that solar loans are actually a better financing option for consumers, and for solar companies; they create competition based on price rather than financing structure. Getting out ahead of this market, and offering a product consumers can easily understand, will give SolarCity the ability to stay one step ahead of competitors.
MyPower also shows that SolarCity is willing to adapt its business model to the changing solar industry. More than a few solar companies have gone bankrupt because they didn't have the foresight or the ability to change as the industry evolves. It would have been easy for SolarCity to cling to a high-margin leasing business as long as possible, leaving others to pave the road to loans. The fact that they didn't is a good sign for long-term investors.
Costs continue to fall The only way to stay relevant long term in the solar industry is to continually improve technology and cut costs. Only companies that can do that year after year will be able to survive.
On the cost front, SolarCity continues to improve and is well on its way to reaching a $2.50 per watt goal in 2017 (I think this is a low bar for SolarCity).
Source: SolarCity earnings presentation.
The only concern this quarter was the rise in sales costs from $0.50 per watt in 2014 as a whole to $0.57, but that's in large part due to rapid expansion plans. As SolarCity slows growth from 100% per year to a more realistic long-term pace of, say, 10%-20%, these costs should come down, and the sales force should become more efficient.
Another cost-cutting measure is also coming in the form of Silevo solar panels. The solar plant SolarCity is building in Buffalo, New York, is due to be fully operational in 2017, and with higher efficiency than today's panels, it will allow SolarCity to get more watts out of each installation.
I certainly have my questions about SolarCity's value on the stock market, but these are three incredibly positive signs for the company, and if it continue to executes on growth and cost-cutting plans, it'll be primed for long-term success.
The article The 3 Biggest Reasons to Buy SolarCity Stock originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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