As Bulls In SolarCity Salivating, Gordon Johnson Firm On His Sell Rating

Nevada’s New Energy Industry Task Force is scheduled to decide on the recommendations of its subcommittee on May 26 regarding the grandfathering of existing solar customers under the state’s previous roof-top solar rates.

Axiom Capital’s Gordon L. Johnson II maintains a Sell rating on SolarCity Corp SCTY.

If Recommendations Are Approved

Based on checks, Johnson believes that “sentiment around the potential approval of this recommendation is gaining momentum — and has lit a fire under SCTY’s shares,” with the share price having appreciated 35 percent since May 10.

Related Link: Myth Buster: This Analyst Is Convinced SolarCity Shares Are Ripe For A Bounce

The analyst explained that if the recommendations of the subcommittee were approved, they would then be considered by Nevada’s Governor, Brian Sandoval, “for possible inclusion in the upcoming 2017 Nevada Legislature.”

According to Chandler Sherman, a spokesperson for Bring Back Solar Alliance, a solar advocacy group, this legislation could allow for 30,000 people to become eligible for the older net metering rates in Nevada, which were also more lucrative.

What Would It Mean For SolarCity?

“While this would likely mean the bulk of SCTY’s previous, un-canceled, Nevada bookings would go through, given there is no change being proposed to Nevada’s new net metering rules, we believe this would not open up any new market opportunities for SCTY beyond its existing backlog,” Johnson stated.

In other words, SolarCity would still not be open for new development in the state.

Johnson pointed out that “assuming SCTY’s roof-top market share in Nevada is the same as it was in California in February 2016, the specific opportunity to SCTY would be 34.1MW, or 3.2 percent of SCTY’s 1,050MW 2016 installation guidance.”

The bottom line is that although there is positive sentiment leading up to the decision, the longer term fundamental impact is likely to be muted.