Option Trade 
SolarCity Corp (NASDAQ:SCTY) Puts 
Monday, 9th May, 2016

** OPTION TRADE: Buy the SCTY Jun 17 2016 22.000 put at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

by Ian Harvey

May 09, 2016

SolarCity Corp (NASDAQ: SCTY), a company that is engaged in the design, installation and sale or lease of solar energy systems to residential and commercial customers, or sale of electricity generated by solar energy systems to customers, is set to release first-quarter 2016 results after the market close today, May 9.

Analysts are expecting the company to post revenues of $108 million for the quarter and a net loss per share of $(2.31), compared to revenues of $67.48 million and a loss per share of $(0.22) for the same quarter of last year.

The company is a well known provider of energy services dealing with solar power systems. SolarCity expects to grow its installations 18% year over year, but decrease 34% y/y to 180 megawatt. The decline is expected due to seasonal slowdown that was higher than usual, and the company’s decision to end its Nevada operations in December.

J.P. Morgan analyst Paul Coster forecasted the upcoming quarterly results noting, “The stock has rebounded from its mid-February lows, as the company demonstrated its ability to raise capital to fund growth, though not yet by enough to provide visibility in support of the 2016 MW guidance. We believe the earnings call will likely focus on the cost and availability of financing, including yesterday’s announced asset- monetization, but also on policy initiatives, including the company’s collaboration with utilities in NY regarding net metering. With the stock trading near our $29 price target, we believe risk-reward is balanced.” The analyst further mentioned he expects “volatility in the stock to remain elevated.” Coster reiterated a Hold rating on SCTY on May 5, 2016 with a $29.00 price target estimate.

SolarCity's stock has lost nearly half of its value in the past year as the market has begun to question the company's ability to keep growing at breakneck speeds.

As well, SolarCity has come under pressure after hedge fund manager Jim Chanos warned that the company will get into "financial trouble in 2016."

Shares of SolarCity will continue to fall as the rooftop solar developer loses money on every installation, Chanos said.

The company's installation figures soared 73% in 2015, but it is pouring money into new installations as part of a strategy that won't generate near-term operating profit. SolarCity reported negative cash from operating activities of $790 million last year.

Chanos reiterated his short position on the company. The stock is down more than 40% since he first revealed his short position in August.

Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.

SolarCity's weaknesses include its generally high debt management risk, weak operating cash flow, generally disappointing historical performance in the stock itself and poor profit margins.

Harvey’s Options Volatility Indicator

The share price of SolarCity Corp declined -60.10 percent for the year. YTD, the current share price of the stock is below -53.65 percent. The company holds earnings per share (EPS) of -$0.60 for the twelve months. Shares of company were moving below of 50 days simple moving average with -9.46% while 200 days simple moving average with -36.84%, after SolarCity (SCTY), best known as the nation’s number one provider of rooftop solar to consumers and businesses, recently introduced a new set of services for utility and grid operators. SolarCity’s new services include installation, financing, and consulting services for utility-scale solar and energy storage resource development, in addition to advanced controls for demand response, distributed energy resources, and aggregated grid services.

The 52-week range of the share price is from $16.31 – $63.79. The company has total market capitalization of $2.16B.

On the fourth-quarter call, SolarCity projected first-quarter operating expenses in the range of $230 million to $240 million and a non-GAAP loss of $2.55 to $2.65 per share, wider than a loss of $2.37 per share in fourth-quarter 2015 and a loss of $1.52 per share in first-quarter 2015.


Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the SCTY Jun 17 2016 22.000 put at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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