Shares of SolarCity, the solar installer that went public last month, soared after analysts at Goldman Sachs, Credit Suisse, and Roth Capital Partners published upbeat reports on the company's prospects.
THE SPARK: Analysts at three firms initiated coverage of the stock with positive ratings and share price targets ranging from $18 per share to $22 per share. On Friday, SolarCity shares closed at $14.40.
THE BIG PICTURE: SolarCity Corp. offers solar "leases" to homeowners that allow them to install panels on their rooftops for no money down and pay less overall for electricity. The customer pays SolarCity a fixed rate every month for the panels along with a lower utility bill because a portion of the customer's electricity is being generated on the roof. Combined, the payment to SolarCity and the lower utility bill is often less than the customer's typical electric bill.
THE ANALYSIS: Analysts like the company's business model and its prospects for growth. Satya Kumar of Credit Suisse wrote that low solar panel prices, rising electricity prices, low interest rates and stable government incentives are helping SolarCity reach new customers. Brian Lee of Goldman Sachs expects that the company's installations will grow 30 percent to 35 percent per year through 2016. Roth Capital's Philip Shen cited the company's simple value proposition: "Clean power below utility rates."
SHARE ACTION: The company first issued shares to the public in December, after having to cut the price of the shares to $8 from an original range of $13 to $15 per share in the days leading up to the offering. The shares have surpassed the high point of that range. Solar City shares rose $1.60, or 11.1 percent, to $16 in afternoon trading, double the company's offering price.