SolarCity Financing Concerns 'Alleviating,' Deutsche Bank Says

SolarCity Corp SCTY has announced a number of tax equity transactions. Deutsche Bank’s Vishal Shah reiterated a Buy rating for the company, with a price target of $49. The analyst expects SolarCity to announce additional transactions over the next few months, which should lend upside to its shares.

Tax Equity Transactions

SolarCity has announced a total of ~$215m of tax equity transactions so far in 2016, and may announce another ~$310m, analyst Vishal Shah mentioned. Moreover, the company had about $650m of tax equity in its books at yearend, which means that it required around $1.2-$1.3b of tax equity financing to meet its installation target for 2016.

Cash Equity Financing

Shah believes SolarCity would need to raise about $1.25b of non-recourse debt financing in 2016, which it has raised merely $400-$500m so far.

“While investor concerns over ABS financing availability appear to be valid (financing costs are also going up to 5-6%), we note that SCTY can still access the cash equity markets by monetizing its operating assets,” the analyst wrote.

Net Metering Concerns Alleviating

Net metering concerns in Massachusetts and other states appear to be gradually alleviating, Shah commented. Massachusetts passed NM 2.0, extending net metering cap for commercial systems from 4 percent to 7 percent, although pricing was slashed by 40 percent.

Uncertainty in the Massachusetts solar market should dissipate, which would act as a positive catalyst for SolarCity’s shares.