NEW BULLISH Plays
SolarCity Corp. - SCTY - close: 52.79 change: +1.77
Stop Loss: 47.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 04, 2016
Time Frame: Exit PRIOR to earnings (late January or early February)
Average Daily Volume = 3.8 million
New Positions: Yes, see below
We recently traded SCTY and caught a good chunk of its December rally. It looks like the stock is poised for round two and about to sprint higher again. Here is an updated play description:
December 2015 saw major headlines with 195 countries signing the Cop21 agreement at a U.N. climate change conference in Paris. Their pledge to fight global warming and cut greenhouse gas emissions could mean major developments for the solar-energy industry.
SCTY is in the technology sector. Officially it's part of the semiconductor industry. They bill themselves as "America's #1 full-service solar provider." According to the company, "SolarCity® provides clean energy. The company has disrupted the century-old energy industry by providing renewable electricity directly to homeowners, businesses and government organizations for less than they spend on utility bills. SolarCity gives customers control of their energy costs to protect them from rising rates. The company makes solar energy easy by taking care of everything from design and permitting to monitoring and maintenance. SolarCity currently serves 19 states."
The earnings picture is improving. Their most recent earnings report was October 29th. SCTY reported their Q3 results. Wall Street was expecting a loss of ($1.94) a share on revenues of $111.4 million. SCTY blew away the EPS estimate with a loss of just ($0.20) a share. Revenues were up +95% to $113.85 million.
The company provided bullish guidance. They see Q4 installations up +58-69% over a year ago. They introduced 2016 guidance of +40% growth for full-year installations. They have also driven their cost per watt to a new low of $2.84. The company is focused on reducing overall costs even more.
If the Cop21 agreement wasn't enough there was also big news out of Washington in December. Both Congress and the Senate agreed to a budget deal that included a five-year extension on solar-energy tax credits. This is a BIG deal for the industry and really fueled the rally behind solar stocks.
After a rally from $25 to almost $59 in just a few weeks SCTY finally encountered some profit taking in the last half of December. You'll notice that shares founds support near $48.35, just below its simple 200-dma. Now after basing there for a couple of days the stock displayed relative strength with a big bounce today (+3.4%).
SCTY still has a lot of short interest and further gains could fuel another short-covering rally. I want to remind investors that SCTY is a volatile stock and we should consider this a higher-risk, more aggressive trade. We will try and limit risk with a stop loss at $47.95. Tonight we are listing a trigger to open small bullish positions at $53.15.
NOTE: This could be a short-term play. Normally we like to exit prior to a company's earnings announcement. There is no set date yet but SCTY will likely report earnings in very late January to mid February. We will update our time frame once the company announces its earnings date.
Trigger @ $53.15
- Suggested Positions -
Buy SCTY stock @ $53.15
- (or for more adventurous traders, try this option) -
Buy the FEB $55 CALL (SCTY160219C55) current ask $3.70
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike