Elon Musk Shows Confidence in SolarCity Corp (SCTY)

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The dictum says that when going gets tough, the tough gets going. That seems to be applicable for Elon Musk, chairman of SolarCity Corp (NASDAQ:SCTY). He is also the Chairman and CEO of Tesla Motors Inc (NASDAQ:TSLA). Currently, the going is not good for the energy company and that reflected in the stock price movement. As a result, the stock is closer a one-year low. In such a situation, the company either allows the market to react to the ground realities or its management enters the market to acquire some shares to repose confidence in it. Though Musk is not the CEO, he chose to buy the shares of the company to impress the investors that the downside could be used as buying opportunities.

Boost His Stake

SolarCity Corp (NASDAQ:SCTY)’s Chairman Musk has demonstrated his confidence in the company’s stock. He appears to have taken every dip as bargain hunting considering that he has been buying the company’s shares since August. For instance, on November 16, Musk acquired 198,615 shares at an average cost of $26.45 a share for approximately $5.25 million. This was in continuation with the acquisition of 223,197 shares at an average price of $25.40 a share on Friday. That resulted in a payout of about $5.67 million. The fresh lot of acquisition of shares commenced on November 12 when Musk bought 83,955 shares at an average cost of $25.2 a share. That made him to shell out $2.12 million.

It is still not clear whether Musk will continue its acquisition of SolarCity Corp (NASDAQ:SCTY)’s share. However, until now, he has purchased more than half a million shares in the three-day trading activities by spending more than $13.04 million in the process. In August, Musk started the process of acquiring the 123,510 shares nearly after two years. He bought at a cost of $40.49 a share by paying about $5.0 million. Before this transaction, Musk acquired 214,869 shares at the rate of $46.54 on October 21, 2013. That also suggests that he is keen on boosting his stake in the company whenever the opportunity comes in. Currently, Musk is holding 21.3 million shares representing a more than 21% stake in the energy firm.

Reasons For Weak Sentiments

SolarCity Corp (NASDAQ:SCTY) shares hit a yearly-high of $63.79 while the low was $24.07. It remains to be seen whether Musk acquisition of shares would halt the downside pressure and reverse the trend. Investors have started punishing the stock after the company slashed its installations forecast for the fourth quarter, as well as, the full year. On a YOY basis, the company has delivered 86% growth installation to 256 MW of solar systems in the third quarter. However, it fell modestly below its guidance of 260 MW. Similarly, the company guided 280 MW – 300 MW of installations in the fourth quarter. That represented YOY growth of 58% – 69%.

As a result, SolarCity Corp (NASDAQ:SCTY)’s outlook for the full year stands reduced to 878 – 898 MW, which was significantly below the outlook of 920 MW – 1GW provided earlier by the company. On top of this, the company has also established installation guidance for the year 2016. Accordingly, the company now sees 1.25 GW of installation. The mid-point represented about 41% YOY growth on the expected installation for the current year. The energy firm made it clear that it was not aiming to achieve the same growth pace in the coming years that helped it to reach the current position.

Plan For Tax Expiration

SolarCity Corp (NASDAQ:SCTY) wants to ensure that it would be in a favorable position to deliver positive cash flow next year. The company believes that it would help in achieving planned ITC expiration in the year 2017. The energy firm also indicated that it would disclose worthwhile reductions in its cost targets by the turn of the year 2017. Investors can expect something during the next earnings call probably in February.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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  • Bryan

    Why would any company be bleeding so bad that it needs to borrow $100,000,000.00 ?

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