Groupon, SolarCity In Bid To Drive Earnings

News that SolarCity SCTY and Groupon GRPN are arranging to offer a coupon on SolarCity system installs may not be as great as some may think.

SolarCity and Groupon both have decreasing outlooks on earnings, and both seem to be utilizing the others’ excitement as a means of driving sales through the agreement for Groupon to sell SolarCity coupons worth $400.

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SolarCity has managed to turn around their earnings level, posting a loss of $2.12 against street expectations of -$5.15. Current readings in context paint a worrisome future picture about SolarCity’s ability to post meaningful earnings:

Groupon has been experiencing similar problems with their earnings; these problems may have been the spark for the two firms teaming up and making headlines -- with the first ever Groupon offering for solar electricity discounting. The discount will be offered through Sunday.

It appears unlikely that either firm will be able to turn around their most recent earnings trends with this announced agreement. The market for people who coupon solar power seems limited, and shouldn’t be viewed as an untapped market that will drive a turn-around for either firm.

On its website, SolarCity says the current cost for their system is about $30,000 -- with $13,500 being offered in government discounts -- bringing the cost to $16,500 for those who wish to install a SolarCity system.

As stated in the fine print, the coupon’s “value will be applied towards SolarCity monthly electric services (SolarLease/PPA, per SolarCity customer agreements)”. This leads one to think the companies have teamed up as a means to drive short-term growth to appease investors, who have been worried about performance since Q1 2014.

These types of agreements may be driving investors to worry, leading to Wednesday's sell-off of over three percent in both companies.