In the past five trading sessions, SolarCity Corp (NASDAQ:SCTY) stock surged 28.3%, from $18.85 to $24.19. Moreover, this might just be the beginning of a new rally. One analyst is saying that there’s still room for SolarCity stock to go up.
Michael Morosi, an analyst at Avondale Partners, maintained an “Outperform” rating on SolarCity with a share price target of $40.00. That would represent a more than 65% upside in SCTY stock! (Source: “Avondale Sees Upsell Opportunities in SolarCity’s Storage and Home Energy management,” Benzinga, last accessed March 7, 2016.)
65% Upside in SolarCity Stock?
It’s hard to predict where a stock might go next, but there are several catalysts that could drive SolarCity’s stock price higher.
First is its business model. Many homeowners want to install solar panels on their rooftops, but they hesitate when they realize how much the initial cost would be. SolarCity solves the problem by offering Power Purchase Agreement plans (PPAs).
Under PPAs, consumers don’t need to pay a penny upfront. Rather, SolarCity installs solar panels on their rooftops and the consumers then buy electricity from SolarCity at a very low price.
Targeting residential consumers is a great move. Despite being much smaller compared to businesses and utilities accounts, homeowners might be the best potential adopters of solar energy.
This is because electricity rates are highest at the residential level. If homeowners can get great savings by switching to solar, they should be more than willing to do so, especially after SolarCity takes care of the hefty upfront cost.
The policy environment is also improving. For instance, the U.S. government decided to extend the 30% federal tax credit for those who install renewable energy systems in their homes and offices. This would give consumers greater incentive to choose SolarCity over traditional utilities companies.
Now, here’s the really exciting part: Elon Musk, chairman of SolarCity, just loaded up on more than $10.0 million worth of SolarCity shares. (Source: “SolarCity (SCTY) Stock Skyrockets on Buyout Speculation,” TheStreet.com, last accessed March 7, 2016.)
The legendary entrepreneur recently bought 569,680 shares of the solar company. Musk made the purchase when SCTY stock was trading as low as $17.56 per share. Still, he paid more than $10.0 million for the shares.
Rumors are saying that Musk might be taking the company private. If he does, there could be a sizable premium on SolarCity stock.
The Bottom Line on SCTY Stock
Elon Musk hasn’t said anything yet and SolarCity doesn’t comment on rumors, so there is no definitive way to know whether Musk would actually acquire the company. One thing is for sure, though: Elon Musk is confident about the potential in SCTY stock.