The solar business is getting hit by declining prices of photovoltaic cells. Here's a look at how two of the big players in the solar energy industry, Tesla, Inc. (TSLA) owned Solar City and First Solar, Inc. (FSLR), are stacked against each other in this intensely competitive field.
SolarCity's Dominance in U.S. Residential Market
SolarCity commands a significant 41% share of the residential solar installation market, and the company also operates in the commercial and utilities space. The company's business model of offering to lease solar panels with no upfront costs has helped it gain a big slice of the residential solar market in the past.
However, the model has put a burden on the company to constantly raise capital from investors to cover the upfront cost of installing the leased solar systems. Following its purchase by Tesla late last year and owing to the solar market dynamics, the company has moved on to allow consumers to take out loans and own their solar arrays outright. It now puts SolarCity in line with practices of other industry players.
During the last quarter of 2016, the loans outpaced leases for the first time. Despite the significant market share, SolarCity’s solar panel installations during the first quarter declined around 39% year over year during the first quarter of 2017. The company has revealed sleek new solar roof panels that it claims are more efficient and cost-competitive compared to regular roofing products.
The Innovative Trends of First Solar
First Solar has done things differently since its inception and managed to cut its own road to success. Right from developing cadmium-telluride (CdTe) based panels to developing advanced grid integration, plant control, forecasting and energy scheduling capabilities, the company has been able to sustain and succeed in the highly competitive solar energy market for decades.
First Solar is hopeful about its new-age Series 6 solar modules and is on course to ramp up the production of its new 400-watt-plus form factor, which will keep it competitive in the coming times, reports GTM. The company operates as a vertically integrated business, which puts it in control of everything starting from sourcing of raw materials to recycling of solar panels.
A Look at Recent Numbers
During the first quarter of 2017, SolarCity’s financial numbers were included in the results of its parent company Tesla. Here's a comparison of the quarter before numbers for the two companies.
Revenue versus Long-Term Debt: While First Solar had a mediocre debt of 265.82 million during the last quarter of 2016, SolarCity was sitting on a huge debt pile with a figure of $1.87 billion. Comparing with the net sales or revenue numbers, SolarCity generated $221.44 million in sales, while First Solar had $891.79 million in sales during the fourth quarter of 2016. The long-term debt to sales ratio for First Solar stood at 30%, while that for SolarCity was at a whopping 844%.
Current Ratio: SolarCity's current total assets stood at $692.93 million, while its current total liabilities were $1.52 billion during the last quarter of 2016. First Solar’s current total assets were $3.3 billion, and the company had liabilities of $527.05 million during the same period. The current ratio, which measures a company's ability to pay short-term and long-term obligations, is calculated as its current total assets of a company relative to its current total liabilities. SolarCity's current ratio comes to a paltry 0.456, while that of First Solar stands firm at a healthy figure of 6.26. (For related reading, see: Is First Solar a Great Deal or a Trap?)
Though First Solar has a bulk of its sales coming from the North American region, it has a globally diversified clientele expanding across multiple continents. SolarCity continues to be a dominant full service player in the U.S. across residential, commercial, and utilities space. Though financial numbers for SolarCity are not available owing to its merger with Tesla, the First Solar 2017 guidance has been improved by the company in the recently announced results. It expects to have net sales in the range of $2.85 billion to $2.95 billion, with earnings per share falling in the range of $(0.30) to $0.40. The shipments are expected to lie in the range of 2.4GW to 2.6GW.