SCTY Stock Forecast for 2016
SolarCity Corp (NASDAQ:SCTY) is back from the dead. To many analysts, it looked like SCTY stock was on the ropes this year, but that all changed last week. The company found its missing link and investors rewarded SolarCity stock with huge gains.
It’s not like investors had a sudden change of heart or anything; the reaction was purely rational. A series of events, beginning in Paris and ending in Washington, shifted the balance of probability in favor of SolarCity.
You have to remember that SolarCity lost more than half of its market value in the last two years. It was a devastating time for the company, with a growing loss on its bottom line and investors losing faith in its broader aims for the solar market.
Even the star power of Elon Musk, the chairman and founder of SolarCity, wasn’t enough to convince investors that SCTY stock was worth owning.
Yet as lawmakers gathered in the “City of Lights” to discuss a global response to climate change, there emerged a consensus that solar and wind were part of the solution. (Source: “Nations Approve Landmark Climate Accord in Paris,” The New York Times, December 12, 2015.)
Paris Climate Deal Was the Tipping Point
Once climate talks came to a successful close in Paris, the politics of solar energy shifted at home. Certain parts of the treaty were probably going to be contentious (subsidies for developing nations to deal with climate change, for example), but the issue had gained enormously in importance. It jumped up the priority list for the Democrats.
Politics may not seem that important to investing, but in this case, they are. One of the major weights on SolarCity stock this year was the possibility of a key tax credit expiring at the end of 2016. The solar Investment Tax Credit, or ITC, gave a break to homeowners who installed solar panels on their roofs.
Since rooftop solar energy is still in its early stages, it hasn’t reached the scale where it becomes economical. The tax credit helps the industry survive, which seems unfair until you remember that all oil and natural gas companies get subsidies, too.