SCTY is one of the most over valued stocks! It does not mean you can make money by shorting it
My friend asked me to look at SCTY and asked me whether it is a good buy after it drop 10% today. After I did my dd, I tell my friend don't touch the stock. The followings are my reason:
Even after it drops 10% today. SCTY still worth about $2.86 billion. It is very very over valued. Why?
The company has only $134 million revenue. The debt is $282 million and cash on hand about $127 million. The company is still losing money. Even assuming the company makes $50 million, it needs to take almost 60 year to make $2.86 billion. Based on these fundamental numbers and by comparing these number to any companies, you can easily get the concluson I draw.
For longs, I hope what I said will not upset you. I hope you will take this as warning.
For shorts, I hope you don't think you can make money by shorting the stock. SCTY is funded and controlled by hedge funds. They can easily manipuate the stock price and force the shorts to cover at wrong price. Any over value stocks can go much higher in a period of time. Especially, since whole solar sector is still in the earlier stage of growth, SCTY might stay higher and go higher in future.
But, eventually, SCTY will drop and it will drop big when it drops.
why it needs to make 2.86 billion in 60 yrs. that is mkt. cap it decided by the mkt. they have to make money by building broad customer base which they are doing, the valuation is high but same was true for tsla or any other growth stock. though they are guiding higher loss next qtr. but still the wattage installed is still increasing so more customers for future revenue streams.
I'm sure the same people thought tsla was overvalued too. Of course scty is still losing money. They're still spending money on installing solar panels for basically no cost to the customer, but only to make rmr in the long run. It's called building a business. The money will pour in after they continue to build they're ongoing customer base. Just imagine when scty installs panels on every single walmart. I can't even imagine how much money a month scty will be making just from that. Then you have tens of thousands of residential customers plus other commercial businesses. This is tsla waiting to explode within a decade's amount time. Can't make a billion overnight ya know.
what a lot of people miss if that SCTY is getting good reputation and majority of people don't know yet that they can lower their electric bill without having to buy the solar panels up front. once they are made aware of it, they want it. took me 10 minutes to get someone to understand how it works and he is getting solar city to install his system this month. this will be growing exponentially.
New emerging technologies and growth stocks are valued differently than the established companies. This company has tremendous growth ahead of it. Every body thought SBUX and GOOG were way over valued when those company went public
You value a well established company with long history by money made.
You value a young company by how well it executes its plan to achieve its goal, and SCTY out paced its own schedule.
SCTY with Tesla is trying to make energy self-content household across the country. The grid that send energy miles away from your house is stupid, providing that you can generate it at you home cheaper and cleaner.
You can short it momentarily. But, it is also risky to short a company with futuristic CEO, since the stock can break out anytime.