SolarCity Corp (NASDAQ:SCTY) got what on the surface looks like a real — and much-needed — accolade on Thursday. Shares are down 55% year-to-date, and down roughly 75% from their early-2014 high, mostly in response to the realization that solar power’s fiscal reality makes it tough to make a buck by being in the business.
The Robert W. Baird upgrade of SCTY stock should be taken with a heaping tablespoon of salt, however, as the analytic arm of the research house frequently flip-flopped with its stance on SolarCity.
In fact, Baird appears to have more of a trading mentality on SCTY than a fundamentally driven one, voicing a new justification for a switch whenever shares appeared to be at a high or low point.
Baird Upgrades SCTY Stock to “Outperform”
The news broke Thursday morning.
RW Baird Analyst Ben Kallo upgraded SCTY back to “Outperform” from a “Neutral” rating, noting he believes regulatory worries have unnecessarily beaten the stock down.
Specifically, with utility companies and utility commissions under monetary pressure, the practice of feeding electricity generated by a residential solar power system back into the grid — paying that customer for it — isn’t as attractive as it used to be.
It’s not an entirely flawed premise. In fact, the logic is pretty tight. Traders do tend to overreact to news, particularly when it comes to storied stocks like SolarCity, and the technology is not just an investment opportunity, but a means of keeping the planet clean.
On the other hand, overdone worries about the future of net-metering may not be enough of a basis for an upgrade of a multi-faceted stock.
Of course, those who have been following Baird’s coverage of SCTY stock will know this new opinion won’t likely last all that long, replaced by a new opinion (probably a downgrade) for a new reason once SolarCity shares make a nice run.
How do we know? History.
On Again, Off Again
Baird is not the only research outfit that frequently switches gears with SCTY, but it’s the only one that did so — again — today. This isn’t anything new, however. The table of Baird’s switched stances on the stock, along with the stated reason for the change, are on the table below.
Things get even more interesting when the changes are plotted on a chart of SCTY stock. Upgrades are marked by “up” arrows, and downgrades are marked by “down” arrows.
To Baird’s credit, it did catch most of the major highs and lows, getting out at the right time and getting in at the right time. But nine opinion changes in a little more than two years (10, technically, counting the initiation in September of 2013)? That’s not investing. That’s trading.
That’s not necessarily wrong, by the way, but it leaves one to wonder if Baird is simply playing the rather predictable volatility here instead of truly taking a fundamental-based stance. The fundamental story can’t be changing that rapidly that much for the company, unless Kallo’s just not looking past the current headlines.
There’s one thing investors/traders don’t have to worry about, though — the firm will make it clear real soon when it feels it’s time to take any profits.
Bottom Line for SCTY Stock
In the grand scheme of things, it’s difficult to pan Robert W. Baird or Ben Kallo too much; for the most part, they’ve been right about SCTY stock. The calls haven’t been easy to follow, though, and they’ve been far more geared toward trading rather than investing.
Perhaps that’s what the market wanted.
In that light, though, if you’re assuming the new opinion on SCTY is a sign that the stock has hit its ultimate bottom and its finally time to dig in for the long haul, think again. Even if net-metering worries were the only potential pitfall ahead, nobody — including Ben Kallo — actually knows what that sliver of future truly holds.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
