SolarCity Installations Decline Amid Shift Away From Growth

  • Panel installations expected to fall 34% this quarter
  • Shares slump most most since initial public offering in 2012

Looks like SolarCity Corp. meant it when the company said it was shifting gears to slow down growth.

The biggest U.S. rooftop solar company installed 272 megawatts of panels during the fourth quarter, according to a letter to shareholders posted on its website Tuesday. That fell short of its October forecast of 280 megawatts to 300 megawatts. And in the current quarter, the company expects installations to decline 34 percent, to 180 megawatts.

The shares plunged 29 percent at the close in New York, the most on record.

The results reflect a strategic pivot for SolarCity, whose chairman and largest shareholder is billionaire Elon Musk. The company has been growing dramatically in recent years, pouring revenue into installing more panels and reporting a string of unprofitable quarters. When it announced its third-quarter results in October, the company saidit was seeking to become cash-flow positive by the end of this year, and it would slow growth.

“The primary focus of the company is on cash generation, with growth our secondary focus,” Chief Executive Officer Lyndon Rive said in the letter.

Delayed Projects

The company attributed the lower-than-expected installation rate last quarter to some commercial projects being delayed, as well as a decision in December by Nevada regulators that SolarCity said makes rooftop solar less attractive to consumers. The company pulled outof the state shortly after.

“With those projects being pushed into the first quarter, first quarter is still 10 percent below expectations,” Michael Morosi, an analyst with Avondale Partners LLC in Nashville, said in an interview Tuesday. “That means that the business is not growing as fast as everybody thought it would.”

SolarCity expects to report an adjusted loss of $2.55 to $2.65 a share in the current quarter. That’s more than the $2.06 average of 12 estimates compiled by Bloomberg.

Trade-Off

“They could grow faster if they chose to,” said Pavel Molchanov, an analyst with Raymond James Financial Inc. “Part of their goal is to get to positive cash flow by the end of the year. There’s a trade-off; they could push to do growth at any price, or take their foot off the accelerator.”

Excluding some items, the fourth-quarter loss of $2.37 a share was less than the $2.58 average of 16 analysts’ estimates compiled by Bloomberg. Net income was $4.6 million, or 4 cents a share, compared to a loss of $3.6 million, or 4 cents, a year earlier. Sales rose to $115.5 million from $71.8 million a year earlier.

“People loved that they were growing at a very fast rate,” said Gordon Johnson, an analyst at Axiom Capital Management in New York. “The growth they were hitting was phenomenal. Now that the growth is questioned, if not questionable, at an accelerated pace, you need to show me cash generation.”

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