SolarCity Corp (NASDAQ: SCTY) saw its shares plunge 30% after the solar power company forecast a larger-than-expected loss for the first quarter amid declining facilities. That means Elon Musk, who owns a large stake in the company, lost $ 705 million in shares. Can SolarCity make a difference?
SolarCity – A Look at the Numbers
The residential solar panel installer noted that his installations will fall short of his target. This means that the company is forecasting a larger loss than expected for the first quarter. SolarCity only advanced 272 megawatts in the fourth quarter, which was below its peak expectations of 300 megawatts.
SolarCity is expected to incur a loss of up to $ 2.65 per share for the current quarter. That’s more than analysts’ expectations of a loss of $ 2.36 per share. At the same time, net income attributable to shareholders was $ 4.6 million, compared to a loss of $ 3.6 million the previous year. Revenue jumped 61% to $ 115.5 million, beating analysts’ estimates of $ 105.6 million.
SolarCity’s panel installation rate also slowed down sharply from the fourth quarter.
On the news, SolarCity shares fell as much as 30% outside of trading hours on Tuesday. In the past 12 months, it has lost 65% of its value. Year-to-date, shares have fallen 62% to around $ 19.
Elon Musk, who is support the solar business, lost about $ 705 million in its 21 million shares after the disappointing results. Musk, the founder of Tesla Motors Inc (NASDAQ: TSLA), lost $ 3.3 billion after both companies reported appalling profits.
Why is SolarCity malfunctioning?
Many wonder why exactly SolarCity, the company that hit as high as $ 80 a share in 2014, is performing so poorly.
The company says its losses come down to delayed business plans and various public policy changes, such as what’s going on in nevada. The latter is what makes solar panels less attractive to homeowners and businesses.
SolarCity, which once had a market valuation of $ 7 billion, might not see any positive news until at least 2018. The company wanted its Silevo solar panel manufacturing plant to be in full production this year, but that might not arrive before mid-2017.
Any kind of delay will have a negative impact on SolarCity’s future, as competitors will have more time to improve their own solar panel plans and keep costs under control.
Investors are probably disappointed with SolarCity, not least because many have bought it for its growth rate. However, as Nasdaq reports, the solar company is probably is going to be a slow growing business. Experts say SolarCity is in a better position in the long run because it is much more stable, its operating costs have been reduced, and it is still generating profits.
Investors may receive better value today than when SolarCity filed its initial public offering (IPO).
In a statement, SolarCity hinted that it wanted to start selling to outside investors based on expected cash flows.
“We believe the key will be monetizing cash equity up to 100% of the contracted value of some of our new debt-free assets (or much less). We plan to have an update on this strategic initiative soon. Stay tuned.”
Many investors are demanding better results right now. They don’t bet on future expectations and assumptions. Can SolarCity deliver? Not if investors don’t have the patience.