This year hasn’t been a particularly good one for some solar stocks. Since the end of 2013, oft-market-favorite First Solar (NASDAQ:FSLR) is in the hole a little more than 5%.
Shares of Chinese player JinkoSolar Holding (JKS) were only up about 2% year-to-date before today’s 4% jump. While some solar stocks have done better, including the all-encompassing Guggenheim Solar ETF (TAN), by and large, 2014 hasn’t been an easy year to remain optimistic about solar plays in your portfolio.
There’s one compelling solar name that has done quite well in recent weeks, however … SolarCity (SCTY). SCTY stock is up an impressive 30% year-to-date, and from a technical perspective, it looks ready to rekindle its recent bullishness.
The relative performance of SCTY stock compared to that of JKS stock or FSLR stock begs two simple yet potent questions from thorough investors: What makes SCTY stock so much better than other solar stocks, and how long can that bullishness last?
SolarCity: The Same, But Different
SolarCity isn’t like most of the names batted around when investors talk about solar stocks. Whereas JinkoSolar and First Solar almost exclusively manufacture photovoltaic panels and the hardware required to make them function, SCTY is a facilitator of solar power solutions.
It provides its customers with installation of solar panels, the pre-installation consultation and design that should take place before an installation, and perhaps most important of all, it provided solar power system buyers with affordable financing solutions.
As it turns out, the decision to package several areas of expertise and solutions under one roof was a brilliant move, for a couple of reasons.
For starters, though most consumers were and still are “pro solar”, most of those consumers haven’t a clue about how to go about putting such a system in place. While panel makers may be technological geniuses when it comes to manufacturing solar cells, most of them simply weren’t prepared to connect with retail buyers. SCTY bridged that gap.
The other reason SCTY stock has been a big winner for shareholders? It’s specifically not a panel maker.
For all the buzz that the solar industry has generated since 2007, it’s still not a profitable venture. The reason most panel makers are still losing money — despite a sharp decrease in global production capacity in addition to a solid increase in consumer demand (now that solar panels are affordable) — is lingering overcapacity and a lingering uncertainty regarding affordability.
As a middleman that can make make solar panels affordable and feasible for consumers, though, SolarCity couldn’t care less about the financial mathematics of panel manufacturing.
So, what’s next for SCTY stock?