UPDATE: Deutsche Bank Initiates Coverage on SolarCity

In a report published Thursday, Deutsche Bank analyst Vishal Shah initiated coverage on

with a Buy rating, establishing a $90.00 price target. According to the report, SCTY's installed base of solar customers is expected to roughly double exiting 2014 and believe growth could accelerate in the 2015-2016 time frame. Declining system costs, customer acquisition costs, financing costs and rising volumes should drive significant scale benefits and operating leverage in the model. “We estimate SCTY's market penetration is ~0.2% in existing markets and believe cumulative MW deployed can reach at least ~3GW by 2016 which would still imply only ~1% market penetration,” the report noted. “Our 2016 estimates are likely conservative as the company has a target to reach ~1M customers implying ~6GW deployed by mid 2018 timeframe. We also assume SCTY's market share of the US residential market decreases from ~30% in 2013 to ~17-18% by 2016 timeframe, implying considerable room for upside. Even at ~6GW deployment, SCTY's penetration of the US residential market would be less than 2.5%.” The report further asserted that the analyst's price target is derived from a sum of the parts valuation with a 12 percent discount rate to value current and future leasing business cash flows. SCTY closed Wednesday at $72.95 with shares trading up at 6.48 percent.