Can Vivint Solar Shine Again after the Failed SunEdison Deal?



The SunEdison impact

On March 7, 2016, Vivint Solar terminated its merger agreement with SunEdison (SUNE) because SunEdison failed to consummate the acquisition in time. According to the company filings, the failed acquisition severely affected Vivint, resulting in a decrease in Vivint’s market share in 2015.

Moreover, the project approval process of its commercial and industrial fund was delayed due to uncertainties in the proposed acquisition, and so the company could not give guidance for 2016. Vivint filed a suit against SunEdison on March 8, 2016, for compensation for these losses, but the outcome of the case remains uncertain.

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Analyst expectations

After Vivint’s fiscal 2015 earning results, analysts expect a slight improvement in 1Q16 revenues compared to 4Q15. For the coming quarter, analysts expect an 8% increase in revenue compared to 4Q15 revenue. Moreover, analysts expect Vivint Solar’s losses to be narrowed in 2H16.

Vivint Solar’s outlook

Moving ahead, Vivint Solar plans to expand its new business ventures, such as selling solar energy systems to commercial and industrial customers through long-term contracts.

In May 2015, the company started to sell solar energy systems to customers through a number of distribution channels. In the short term, it’s important for Vivint Solar to grow its C&I (commercial and industrial) segment into a revenue-generating operation. However, there are many uncertainties and risks involved in the success of such new ventures. According to company filings, the C&I segment has not generated any revenue as of February 29, 2016.

In the long term, the residential electricity rates of traditional utilities and environmental regulations will decide the growth of downstream solar (TAN) players like Vivint Solar (VSLR), Sunrun (RUN), SolarCity (SCTY), and SunPower (SPWR).

In the final part of this series, we’ll learn about the relative valuation Vivint Solar compared to its peers.


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