Raymond James Bullish on SolarCity (SCTY) Following Latest Q3 Industry Data

Raymond James is out positive on SolarCity (Nasdaq: SCTY) following the latest quarterly report released by Solar Energy Industries Association/GTM Research.

Analyst Pavel Molchanov noted, overarching headline is that U.S. PV installations totaled 1,354 MW in 3Q14, up 41% y/y – splitting the difference between 1Q’s growth rate of 79% and 2Q’s 21%. As has been the case historically, utility-scale projects remained the largest component of the market (825 MW or 61%).

Molchanov continued, Based on the industrywide data above, it is straightforward to calculate the 3Q14 residential market share of SolarCity. SolarCity installed 119 MW of residential systems in the quarter (out of its total deployments of 137 MW), giving it what is clearly an all-time high share of 39%. This is 9% above our aforementioned long-term assumption and 4% higher than the 2013 actual of 35%. (1H14 was in the low-30% range.) Of course, there is always noise in short-term market share statistics, but it is very hard for us to imagine SolarCity falling back down to 30%. On the contrary, we wouldn’t be surprised if the 50% level were approached over the next 12 months. The company remains in aggressive investment mode, a strategy that also carries the inevitable side effect of rapid escalation in corporate operating expense. It’s worth noting that, while SolarCity is clearly growing faster than the overall residential market and remains by far the largest player, there is also room for other top-tier players to gain share, most notably Vivint Solar (at 16% in 3Q) and privately-held Sunrun. Quite simply, the biggest players are getting even bigger – a function of brand name, geographic footprint, operational skillset, and, of course, the ability to raise vast amounts of capital (especially lower-cost capital) to provide leases.

Raymond James rates SolarCity at Outperform with a price target of $75.

For an analyst ratings summary and ratings history on SolarCity click here. For more ratings news on SolarCity click here.

SolarCity closed at $50.29 yesterday.

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