Why Analysts Expect SolarCity’s Revenue to Fall in 1Q16



SolarCity’s revenue estimates

SolarCity (SCTY) reported about $115 million in consolidated revenue for 4Q15. Analysts estimate that the company will report revenue of $113 million in 1Q16. This is nearly a 2% decline in revenue on a quarter-over-quarter basis.

The marginal decline in 1Q16 revenue is mainly due to an anticipated decrease in MW (megawatts) installed during 1Q16. However, analysts’ expect the company’s revenue to increase from 2Q16. This is in line with SolarCity’s fiscal 2016 guidance.

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2016 guidance

SolarCity confirmed its fiscal 2016 guidance in its latest company filings. Although the company is anticipated to report lower MW installed in 1Q16, SolarCity maintained its fiscal 2016 installation target of 1.25 gigawatts. SolarCity made 870 MW of solar (TAN) installations during fiscal 2015.

According to a company filing, SolarCity expects to install 180 MW in 1Q16—compared to 272 MW installed during 4Q15. The anticipated decrease in MW installed is due to SolarCity’s market exit from Nevada due to eliminating the net metering system in the state. This also led to the Market exit of its peers Vivint Solar (VSLR) and Sunrun (RUN). SunPower (SPWR) didn’t exit the Market. Also, the company reduced its 1Q16 MW installed guidance due to a longer lead time in its ongoing commercial projects and seasonal change in demand.

Moving ahead, the company intends to focus on generating positive cash from its operations by the end of fiscal 2016. For 1Q16, SolarCity expects its operating expenses to be $230 million–$240 million. This includes $30 million–$32 million in non-cash amortization of intangible assets and stock expenses. Also, the company expects to report EPS of -$2.55–$2.65 before accounting for loss or income attributable to non-controlling interests.

In the next part of the series, we’ll take a closer look at SolarCity’s 1Q16 margin estimates.


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