It would be wise for current shareholders of SolarCity to take some profits and for interested investors to wait for a pullback before getting in. Bulls make money, bears make money, pigs get slaughtered. SolarCity Corp (NASDAQ:SCTY)’s stock has had a tremendous run, which has been described by Raymond James analyst Pavel Molchanov as “bubble-like.” Also, a June 11 lock-up expiration date will, according to Credit Suisse, increase SolarCity’s tradeable float by 8 to 10 times. This in turn will loosen up a short squeeze on the stock believed to have contributed to its rise and put downward pressure on the stock.
However, there are several catalysts (besides SolarCity’s strong business mode) that should propel SolarCity higher in the medium and long-term.
By the end of the third quarter of 2013, SolarCity Corp (NASDAQ:SCTY) plans to have fully transitioned from performing energy efficiency upgrades themselves to recommending third-party vendors that specialize in such upgrades to its customers. This in turn should generate significant additional revenue for SolarCity as more vendors pay SolarCity referral fees for introductions to potential customers.
SolarCity also has significant growth potential. SolarCity is aggressively expanding, forging partnerships with Walgreen Company (NYSE:WAG) and Wal-Mart Stores, Inc. (NYSE:WMT) to equip select stores with solar panels. It also recently announced a $65 million partnership with Honda, which will market SolarCity Corp (NASDAQ:SCTY) solar projects to Honda’s millions of customers.
Right now, SolarCity is undertaking the largest residential solar photovoltaic project in American history, called Project SolarStrong. Through this project, SolarCity will provide solar power to up to 120,000 military housing units. Moreover, SolarCity has partnered with Shea Homes to develop SheaXero communities, which include environmentally conscious “no electric bill homes.” Although it has over 57,400 customers and numerous partnerships with communities and corporations, SolarCity Corp (NASDAQ:SCTY)’s current market penetration of the 14 states it operates in is only 0.12%. The company has a lot of room to grow and is just getting started.
Given the attractiveness of its services, its aggressive expansion, and its tremendous expansion opportunities, SolarCity has huge variables working in its favor. However, its stratospheric stock performance may have gotten ahead of the company. Keep an eye out for SolarCity Corp (NASDAQ:SCTY)’s stock performance after the June 11 lock-up expiration. If the shares cool down a little, review the company’s fundamentals and catalysts and invest accordingly.
George Liu has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article The Solar Stock That’s on Fire originally appeared on Fool.com.
George is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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