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Why Did SolarCity’s Stock Tumble after 1Q16 Earnings?

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Earnings announcement

SolarCity (SCTY) announced its 1Q16 earnings after market hours on May 9, 2016. In this series, we’ll analyze SolarCity’s 1Q16 results in detail and compare the results with analyst expectations. We’ll also take a look at the management’s guidance, analyst expectations for 2016, and the outlook for the company going forward.

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SolarCity’s stock reaction

SolarCity posted mixed results for 1Q16. The company reported adjusted EPS (earnings per share) of -$2.56 compared to the analyst consensus EPS estimate of -$2.31. On May 10, 2016, SolarCity’s stock price opened nearly 21% lower than the previous day’s close. SCTY stock has lost nearly 32% since the announcement of its 4Q15 results on February 9.

SolarCity’s weak fiscal 2016 megawatt installation guidance, lower-than-anticipated 1Q16 bookings and higher cost of revenue dragged down the stock price further. The broad-based market cues helped SolarCity’s stock to recover marginally from its intraday low of $16.5, and the stock closed at $17.8 during an intra-day trading session on May 10, 2016.

Peer performance

On May 10, 2016, SolarCity’s peers Sunrun (RUN) and Vivint Solar (VSLR) lost nearly 14% and 2%, respectively. SunPower (SPWR) stock lost almost 1.5%.

The failed acquisition deal with SunEdison (SUNEQ) led Vivint Solar stock to tumble nearly 69% since February 9, 2016. SunEdison filed for Chapter 11 bankruptcy on April 21, 2016.

The Guggenheim Solar ETF (TAN), which tracks the broad-based solar market, closed nearly flat during the intra-day trading session on May 10, 2016. The SPDR S&P 500 ETF (SPY) was up by nearly 1%.

In the next part of this series, we’ll look at SolarCity’s key operating metrics in 1Q16.

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