SolarCity outlook disappoints despite 20% Q3 revenue increase

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Following a reported net loss of $70.1 million in the third quarter, SolarCity’s ambitions appeared slightly behind schedule despite posting a 20% quarter-on-quarter rise in revenue.

The leading U.S. solar leasing company continues to operate at a loss, but revenue of $58.34 million in Q3, while slightly below the expected target of $60 million, nonetheless represented an encouraging performance. In total, SolarCity booked orders for 230 MW of PV projects – up from 91 MW in the same quarter in 2013.

In terms of built installations, SolarCity added 137 MW of systems; again, below the anticipated threshold of 144 MW. The company has since revised its annual forecast down to the lower end of its previous 500-550 MW. SolarCity now expects to end 2014 with between 505 MW and 520 MW installed.

Losses widened from $47.7 million in Q2 and $37.8 million in Q3 2013, prompting shares in the company to slide 4% as Wall Street exhibited slight disappointment in the Elon Musk-backed installer.

While underwhelming, analysts believe SolarCity is still performing well on both volume and cost fronts. Deutsche Bank remarked in its latest equity research report that 2015 looks bright for the company, pointing to strong bookings growth (5.5% up on Q2 levels), sequential cost improvement (from $3.03/W in Q2 to $2.90/W in Q3) and the surging residential solar sector in the U.S. as reasons to be bullish.

Moving beyond residential

SolarCity revealed in its third-quarter earnings conference call that it will once again target an 80/20 mix of residential and commercial installations in 2015 as it seeks to build upon its market-leading position in the residential leasing sector.

Market data revealed that SolarCity installers hammered into place more solar panles in Q2 than the next 50 competitors combined, but despite – or perhaps because of – this residential dominance, commercial installations have yet to fly. In Q3, just 18 MW of commercial projects were completed – a figure that is roughly the equivalent to Q3 2013.

SolarCity’s ambition is to secure a larger slice of the commercial sector in the U.S., having recently completed installations for some of the country’s largest household names, including eBay, Walmart and Intel.

Yet the feeling within the industry is that SolarCity has struggled to wrestle with the different challenges that commercial operations present – tougher negotiators on cost, variable roof sizes and materials involved, and lack of a clear method for determining a client’s creditworthiness.