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SolarCity Lowered by Barclays on Rate Hike, Default Worries
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SolarCity Corp. saw its stock downgraded yesterday by Barclays analyst Jon Windham on the possibility of a rate hike by the Federal Reserve in September as well as on weaker consumer credit.
Barclays downgraded SolarCity stock to ‘Underweight’ from ‘Equal Weight’ and lowered their price target to $28 from $35. Yet shares of the solar company were up 2.63% to close at $21.88 on Monday's trading session.
The downgrade of SolarCity came amid growing concerns of a possible higher interest rate given “the sensitivity to financing cost in the asset-backed securities or ABS and tax-equity markets; and the long duration nature of their consumer leases portfolio."
Investor concerns surrounding consumer credit quality following Synchrony Financial's (SYF - Free Report) recently announced increase in net charge-off rates also led to the downgrade.
Although Barclays remains apprehensive about the strength of the U.S. residential solar market, the firm favors SolarEdge Technologies, Inc. (SEDG - Free Report) "due to its ability to continue to grow market share, diversification between leased and system sales markets, and strong balance sheet position."
Market Reaction
In spite of Barclays’ downgrade, shares of Solar City surged 2.63% yesterday. Investors have chosen to brush off Barclays’ cautions and have instead focused on SolarCity’s long-term potential.
SolarCity announced on Monday that it would expand its operations into Houston.
Unflattering Scorecard
But there is no denying that this leading U.S. residential solar installer is struggling with its stock down 57% year to date after incurring three successive quarters of losses. The company’s mounting expenses and repeated losses have stirred investor concern over its business model.
This May SolarCity reported first-quarter 2016 results. The company incurred an adjusted loss of $2.56 per share, much wider than the Zacks Consensus Estimate of a loss of $2.30 and the year-ago loss of $1.52 per share. The wider loss can be attributed to the company’s rising expenses.
Later that month, Deutsche Bank reduced the price target for SolarCity to $32 from $49 given concerns that the shares might remain in a trading range in the near term despite the firm holding a positive long-term view on the stock.
Zacks Rank
SolarCity carries a Zacks Rank #3 (Hold). A couple of solar stocks with a better rank are ReneSola Ltd. (SOL - Free Report) and Hanwha Q CELLS Co., Ltd. , both sporting a Zacks Rank #1 (Strong Buy).
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SolarCity Lowered by Barclays on Rate Hike, Default Worries
SolarCity Corp. saw its stock downgraded yesterday by Barclays analyst Jon Windham on the possibility of a rate hike by the Federal Reserve in September as well as on weaker consumer credit.
Barclays downgraded SolarCity stock to ‘Underweight’ from ‘Equal Weight’ and lowered their price target to $28 from $35. Yet shares of the solar company were up 2.63% to close at $21.88 on Monday's trading session.
SOLARCITY CORP Price
SOLARCITY CORP Price | SOLARCITY CORP Quote
Why the Downgrade?
The downgrade of SolarCity came amid growing concerns of a possible higher interest rate given “the sensitivity to financing cost in the asset-backed securities or ABS and tax-equity markets; and the long duration nature of their consumer leases portfolio."
Investor concerns surrounding consumer credit quality following Synchrony Financial's (SYF - Free Report) recently announced increase in net charge-off rates also led to the downgrade.
Although Barclays remains apprehensive about the strength of the U.S. residential solar market, the firm favors SolarEdge Technologies, Inc. (SEDG - Free Report) "due to its ability to continue to grow market share, diversification between leased and system sales markets, and strong balance sheet position."
Market Reaction
In spite of Barclays’ downgrade, shares of Solar City surged 2.63% yesterday. Investors have chosen to brush off Barclays’ cautions and have instead focused on SolarCity’s long-term potential.
SolarCity announced on Monday that it would expand its operations into Houston.
Unflattering Scorecard
But there is no denying that this leading U.S. residential solar installer is struggling with its stock down 57% year to date after incurring three successive quarters of losses. The company’s mounting expenses and repeated losses have stirred investor concern over its business model.
This May SolarCity reported first-quarter 2016 results. The company incurred an adjusted loss of $2.56 per share, much wider than the Zacks Consensus Estimate of a loss of $2.30 and the year-ago loss of $1.52 per share. The wider loss can be attributed to the company’s rising expenses.
Later that month, Deutsche Bank reduced the price target for SolarCity to $32 from $49 given concerns that the shares might remain in a trading range in the near term despite the firm holding a positive long-term view on the stock.
Zacks Rank
SolarCity carries a Zacks Rank #3 (Hold). A couple of solar stocks with a better rank are ReneSola Ltd. (SOL - Free Report) and Hanwha Q CELLS Co., Ltd. , both sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>