SolarCity has a lot riding on the earnings report it will issue late Monday afternoon.
The solar energy systems installer has a recent history of disappointing investors, whether by sharply scaling back its growth plans during the third quarter of last year or by installing fewer megawatts of solar generating capacity than analysts expected during the fourth quarter.
Each time, SolarCity’s stock took a big hit.
Here are four things to watch for when SolarCity releases its first-quarter earnings after the stock market closes on Monday.
• Are installations on track? SolarCity has forecast that it will install 180 megawatts of solar panels in the first quarter. That’s 18 percent more than it installed during the first three months of last year.
Falling short during the first quarter could raise questions about whether the company will be able to reach its full-year goal of installing 1,250 megawatts of generating capacity.
Patrick Jobin, an analyst at CreditSuisse, is bracing for a disappointment.
“We remain modestly cautious into earnings next week, where be believe the tepid booking trends may lead to an annual guidance cut,” he wrote in a note to investors this week.
• How much will SolarCity lose? Analysts are expecting SolarCity to report a loss of $2.34 per share, excluding extraordinary items, much more than the $1.52 per share it lost during the first quarter last year.
A smaller loss would indicate progress in SolarCity’s quest to stem its losses and generate more cash. A bigger loss would indicate that goal is farther away.
• Is SolarCity generating more cash? CEO Lyndon Rive has said the company’s primary goal this year is to generate more cash than it uses in its operations by the end of the year. Reaching that goal is a big reason why SolarCity scaled back its growth plans last fall.
The earnings report will give a glimpse of whether the company is on track to meet that goal. The recent $227 million financing deal was a step in that direction, raising $3 per watt in cash for the company, while its costs have been averaging $2.71 per watt.
That financing deal is an indication “that the company has a path to generate upfront cash flow to fund growth,” Jobin said.
• Is the money there? Because SolarCity bears the cost of installing the rooftop solar systems for its residential customers, it has an enormous appetite for new capital so it can pay for those installations.
In return, SolarCity receives regular monthly payments from those residential customers over a 20-year period. That forces SolarCity to convert those small monthly payments into securities that it can sell to investors, much like a bank packages the payment stream from mortgages and sells them to investors.
Analysts say SolarCity needs to raise more than $1 billion to meet its installation target this year, and the company took a significant step toward that goal this month when it raised $227 million through a new type of financing.
Cost also is an issue. SolarCity has been forced to pay higher interest rates to investors who have bought its securities this year, raising the company’s borrowing costs. What SolarCity executives say about the company’s financing activities will be watched closely.