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What to Expect from SolarCity’s Future Earnings

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SolarCity’s guidance

The grandfathering of a net energy metering system in Nevada and the delayed regulatory decisions in California, Massachusetts, and New Hampshire led to lower 1Q16 bookings for SolarCity (SCTY). According to company filings, the planned price increase in January 2016 also shifted the demand to 4Q15. As a result, SCTY’s bookings were 150 megawatts lower than the expected 1Q16 bookings.

After 1Q16 results, SolarCity revised its fiscal 2016 GW (or gigawatt) installation guidance from 1.3 GW to 1.0–1.1 GW. For 2Q16, the company anticipates making installations of 185 MW.

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Analyst expectations

After the company released its 1Q16 earnings, analysts lowered their 2Q16 revenue estimates for SolarCity. Moreover, they revised down their 2H16 revenue estimates in line with the company’s guidance.

For the upcoming quarter, analysts have decreased their revenue estimates by nearly 10% from their pre-1Q16 earnings estimates. Analysts expect the company to report revenue of $146 million as compared with their previous estimate of $157 million. However, analysts anticipate that the company will post higher EBITDA values moving forward.

That said, analysts lowered their consensus 12-month target price from $40.59 to $33.25 after SolarCity’s 1Q16 earnings release.

Outlook

Moving ahead, SolarCity’s newly launched residential solar (TAN) loan offering could help the company in reviving its bookings in the short term. Moreover, the resolved regulatory issues could bring down the company’s customer acquisition costs in the future. In the long term, it’s crucial for downstream solar companies like SolarCity, Vivint Solar (VSLR), Sunrun (RUN), and SunPower (SPWR) to continue monetization of their assets to fund their expansion and generate positive cash flows from operations.

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