SolarCity (NASDAQ:SCTY) will be releasing the quarterly earnings report of the fourth quarter of fiscal 2014 on Wednesday, and investors and analysts will be paying a lot of attention to the results to determine as to how the company performed this quarter, and what is expected from the company in fiscal 2015.
Investors may not know this right now, but the company may be getting some victorious figures this quarter, because of the fact that it is now making a transition from a lease based model to that of a sales/loan model; the investors may witness a drastic change in the overall figures. The investors have to consider the following aspects in order to have a better understanding as to what is happening and what to expect:
Installations vs. Expectations:
One of the most surprising facts of the third quarterly report of the company was that the sales of SolarCity (NASDAQ:SCTY) were not exactly increasing as rapidly as expected. The administration of the company failed to execute on a commercialized solar based product, due to which the midpoint of the awaited installations was cut down from 525 Megawatt to 512.5 Megawatt. Even though the miss was quite small, but because SolarCity (NASDAQ:SCTY) has had a propensity of trumping its own expectations, it came as a hard blow to the company.
So, obviously, it is extremely important for the company to meet its expectations in the fourth quarter so that for fiscal 2015, it gets on the right track. Around three months earlier, the management expressed that it was hoping to install about 920 Megawatts to around a 1,000 Megawatts during 2015. If that figure is slightly missed or beaten, it would have a very significant effect on the stock.
Profitability of the solar business:
SolarCity (NASDAQ:SCTY) declared a 200 million dollars funding facility for MyPower on January 14, 2015. MyPower is a solar loan program offered by the company. During the press release, SolarCity (NASDAQ:SCTY) announced that the company had around 8,000 consumers who agreed to sign up for the program, so all they could do at the time was to wait for the results to see how the project would eventually turn out.
As opposed to having clients who sign up for an extended lease or some sort of a solar power purchase agreement, the program is basically an offer from the company through which the profits and income margins would be identified in the quarter in which the scheme was sold. So considering that, the numbers in the fourth quarter would not be very impressive, as the offer has just been launched for the first time.
However, it would be important for the company because the overall sales of SolarCity (NASDAQ:SCTY) have never been significantly profitable. At the moment, SolarCity (NASDAQ:SCTY)’s stock is priced at a good and profitable rate. Now, we have to wait and see if the management is competent enough to deliver good results.