SolarCity (SCTY) Stock: Earnings Drag Solar Industry Down

SolarCity Corp (NASDAQ: SCTY)

SolarCity is having an incredibly bad day in the market, dragging Sunedison Inc (NYSE: SUNE), Canadian Solar Inc (NASDAQ: CSIQ), and the rest of the solar industry down with it. Yesterday, after the closing bell, SolarCity released earnings for the fourth quarter of 2015. While earnings were relatively positive, the guidance the company released was anything but. Today, we’ll talk about what we saw from the earnings report, how the market reacted to the news, and what we can expect to see from SCTY moving forward.

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SCTY Earnings In Focus

As mentioned above, SolarCity released its earnings report for the fourth quarter of fiscal 2015 after the closing bell last night. While the company did beat expectations with regard to both revenue and earnings per share, guidance was a big hit to SCTY investors and investors in the solar industry as a whole. Here’s what we saw:

  • Earnings Per Share – In terms of earnings per share, SCTY did relatively well. The company posted fourth quarter earnings in the amount of -$2.37 per share. While that may seem like a big miss, the figure actually comes in well ahead of what analysts were expecting. Analysts expected to see a loss of $2.57 per share on earnings in the quarter.
  • Top-Line Revenue – In terms of revenue, SCTY also produced a positive result. While analysts expected the company to produce revenue in the amount of $106 million. The company actually produced revenue for the quarter in the amount of $115.48 million.
  • Guidance – This was the big kicker on the report. SCTY reported guidance for the first quarter of 2016, coming well below expectations and creating concerns with regard to growth in the year. In the first quarter, SCTY expects to generate a loss of between $2.55 per share and $2.65 per share. This is a much wider loss than what Wall Street was expecting. Analysts are expecting to see a loss of $2.36 per share.

How The Market Reacted To The News

As investors, we’ve learned that there are few factors that can move the needle in the market more than earnings reports, and that has proven to be true with the SolarCity report. While earnings and revenue were ahead of expectations, guidance is a big issue. After all, investors invest for growth, and with weak guidance, we’re definitely going to see some disappointment surrounding the stock. As a result, SCTY is tanking today. Currently (10:03), SCTY is trading at $18.69 after a loss of $7.66 per share or 29.07%.

What We Can Expect To See Moving Forward

Moving forward, I have to say I’m a bit concerned with SCTY. Looking at earnings releases of today and yesterday, we see that the loss the company takes quarter over quarter is growing, and that’s going to be a big concern for investors. Sure, the company is investing in infrastructure. However, until that infrastructure pays off, investors are likely to be fearful, and fear leads to declines. So, moving forward, I’m expecting to see declines in the short run. However, SCTY is a great company and in the long run, I believe that we will see bullish movement.

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What Do You Think

Where do you think SCTY is headed moving forward and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikipedia]

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