Credit Suisse Says Existential Questions Were Raised With SolarCity's Weak Bookings, Guidance Cut

SolarCity Corp SCTY reported weaker-than-expected bookings for 1Q16, while cutting its guidance for the full year.

Credit Suisse’s Patrick Jobin maintains an Outperform rating on the company, while lowering the price target from $62 to $38.

Weak Booking

“SolarCity seems to be faced with re-proving the merits of their business model each quarter – facing either operational, regulatory, capital, or competitive challenges,” Jobin mentioned.

Bookings for 1Q were very weak, representing 60 percent quarter-on-quarter and 33 percent year-on-year decline.

Jobin explained that the “alarmingly weak” bookings were driven by several factors, including “Nevada's unfavorable net metering decision which does not include grandfathering.”

Bookings for 1Q were also impacted by regulatory uncertainty in SolarCity’s key markets, such as New Hampshire, California and Massachusetts.

Related Link: Any Silver Linings? SolarCity's Q1 Had "Plenty For The Bears"

Guidance Cut

The annual guidance was reduced by 12&ndaash;20 percent to 1.0–1.1GW. This, in turn, brings down the growth outlook for 2016 from 44 percent to 21 percent.

“The magnitude of the bookings weakness and guidance cut, however, were both slightly more than we expected and the capital challenges facing the company will force investors to re-evaluate the merits, and valuation, of SCTY's business,” the analyst stated.

The installation guidance for 2Q is also below the prior estimate, driven partly by a 14MW utility scale project being completed ahead of schedule in 1Q.