SolarCity Seeks To Differentiate Through Products, Says Oppenheimer

SolarCity Corp SCTY reported its second quarter results after Tuesday's market close. SolarCity's stock were relatively unchanged given a pending merger agreement with its sister company, Tesla Motors Inc TSLA.

Colin Rusch of Oppenheimer commented on SolarCity's quarterly results, noting that while the company's installs were ahead of expectations in the second quarter, unit economics "continued to show a deteriorating trend."

Related Link: SolarCity Beats Expectations, Costs Of Solar Systems Rises

Rush continued that SolarCity's system cost per watt rose 7 percent year-over-year and the NPV margin on systems deployed in the second quarter fell to 6.8 percent from 22.9 percent a year ago. Nevertheless, the analyst sees "significant opportunities" moving forward for cost rationalization and lower capital recycling needs as the company undergoes an "incremental shift" from leasing towards loan/sales.

However, near-term financing requirements remain an issue and the pending merger with Tesla could "further impact capital velocity" over the next 1 to 2 quarters.

"As asset financing capabilities grow less crucial to the business model, SCTY is seeking to differentiate through products, including energy storage, Silevo high-efficiency panels, and a potential future integrated roof offering," the analyst wrote. "We believe the product-driven strategy resonates with TSLA's approach, but will require significant investment and faces heavy competition, particularly on
panel costs."

Bottom line, SolarCity has "significant scale advantages" along with a differentiated financing strategy which best positions the company to benefit from an upcoming "robust" solar installation market.