by Tom Taulli | February 25, 2014 2:21 pm
After the close of the market yesterday, SolarCity (SCTY) reported its fourth-quarter results … sort of.
Because of accounting complications and issues, the company could only provide preliminary results. The full SolarCity earnings report will not come out until March 3.
Not that SCTY stock investors are worried. SolarCity shares are actually up 5% today.
Which is odd, because whenever there is a concern about accounting, a company’s shares usually get whacked. But SCTY stock seems to be in a different category.
Not that it wasn’t already in a different category before.
SolarCity is one of the brainchildren of Elon Musk, who has made shareholders a bundle on Tesla Motors (TSLA). Not that investors in SCTY stock are holding out their hands; SolarCity is up a sizzling 888% since its IPO in December 2012.
What SCTY did report was encouraging. Revenues in the quarter came to $47.3 million, up 87% on a year-over-year basis and much better than the $43 million expected by Wall Street analysts. If nothing else, that’s probably one of the biggest factors keeping SCTY stock aloft today.
The growth should continue, too. For 2014, SCTY predicts a range of 475 megawatts to 525 megawatts of production, which would represent growth of 71% to 89%.
However, the numbers might be subject to change. In the earnings release, SCTY indicated that it has had a tough time with the accounting for some of its acquisitions, such as the $158 million purchase of Zep Solar (a developer of rooftop systems) and the $120 million deal for Paramount Solar (a sales and marketing firm). SCTY also had a tough time allocating costs for its increase in megawatts production.
In short, SolarCity just didn’t have enough time to get its earnings in generally accepted accounting principles (GAAP) shape or to provide any meaningful earnings numbers. (But, for the record, Wall Street is expecting a loss of 56 cents per share.)
Regardless of the good news and Wall Street’s reaction, it’s hard for me to feel comfortable with the delay in SolarCity’s earnings report. The company has had months to figure the numbers out, and if nothing else, the delay is an indication of sloppiness — not a good sign for any company.
Also troubling is the bearish camp crowding around SolarCity. The short interest on SCTY stock is a whopping 43% of the float (10% is normally enough to prompt a little worry). That’s doubly disconcerting considering the fact that short sellers have had a rough time in general thanks to the markets’ longer-term bullish run, yet still are willing to take a monstrous bet on SCTY.
Meanwhile, SCTY trades at a sky-high 46 times sales, which is the hallmark of absurdly lofty expectations.
Especially considering today’s bullish move, a disappointment on the earnings end when SolarCity fully reports next week, and SCTY could be in for some disappointment.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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