SolarCity stock drops 20% on loss, slower growth plan

October 29, 2015, 10:07 PM UTC
A SolarCity Installation As Earnings Figures Are Released
A SolarCity Corp. employee carries a solar panel during an installation at a home in the Eagle Rock neighborhood of Los Angeles, California, U.S., on Wednesday, May 7, 2014. SolarCity Corp., the largest U.S solar-power provider by market value, is expected to announce quarterly earnings figures after the close of U.S. financial markets on May 7. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Photograph by Patrick T. Fallon — Bloomberg via Getty Images

The largest solar installer in the U.S., SolarCity, saw its stock drop about 20% in after hours trading, following a larger than expected loss for its third quarter financial results, and news that the company will start focusing on cost cutting and slower growth next year.

In a conference call Thursday, SolarCity CEO Lyndon Rive said that while the company has been growing between 80% to 90% every year, next year the company will limit growth to about 40%. SolarCity (SCTY) aims to be cash flow positive by the end of 2016, said Rive.

Rive said there will still be strong demand for solar panels in the U.S. in 2016, particularly because customers will be rushing to take advantage of a government tax credit that will fall from 30% to 10% at the end of 2016. But the company wants to reduce the extra costs that it has been accruing by growing so quickly.

SolarCity hopes that the cost cutting will put it in a stronger position when the government tax credit does ramp down in 2017, which could dampen demand for solar panels in the U.S. The tax credit could be extended by Congress, but SolarCity is operating its business assuming the credit will be reduced.

For the third quarter, SolarCity posted a loss of $2.10 per share, which was larger than the $1.95 per share loss that analysts were expecting. The company posted a negative net income of $234.27 million for the quarter, which was a larger loss than the $70.12 million it lost in the same quarter in 2014.

On the other hand, SolarCity posted larger-than-expected revenue in its third quarter of $113.86 million, while the Street was expecting $111 million. The company generated about half of that revenue, at $58.34 million, in the same quarter a year earlier.

SolarCity is estimating solar panel installations of between 280 to 300 megawatts for the fourth quarter of this year, which would mean the company would install between 878 to 898 megawatts this year. That new estimate is below the low of SolarCity’s previous annual guidance.

The result of SolarCity growing so quickly over the years is that the company has now reached 1 gigawatt (1,000 megawatts) of solar panels installed. The company is building a factory in upstate New York that will make highly efficient solar panels using technology that the company acquired.

SolarCity is run by brothers Lyndon and Peter Rive, and their cousin Elon Musk is the company’s chairman and major investor.

The company’s stock has taken a beating this year, and declined from a high of $63.79 in May. The stock is trading at $30.77 in after hours trading.

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