SolarCity (SCTY) Outlook Brightens After Latest Walmart (WMT) Project

By Jeffrey Moraes and John Darsie, T3Live Jun 26, 2013, 10:47 AM 

Industry giant Walmart (NYSE:WMT) and Elon Musk’s SolarCity (NASDAQ:SCTY) announced yesterday in a joint press release that the two companies have completed solar projects at eight Walmart stores and two Sam’s Club across Maryland. The news is a huge boon for the still nascent SolarCity, which saw its stock jump more than 12% yesterday on the news. Momentum continued early in today’s session, but SCTY is now well off its highs of the day.

The completion of the project, which Wal-Mart and SolarCity project will generate 4.1 million kilowatt hours (kWh) of electricity every year – enough to power more than 370 homes, and is expected to supply 5-20% of each individual store’s electricity use. The project has received much praise from both business figures and environmental organizations. “Building a clean energy economy creates new jobs and provides affordable, reliable clean energy choices for businesses,” said Abigail Ross Hopper, director of the Maryland Energy Administration. “The partnership between SolarCity and Walmart shows that we’re taking the right steps.”

SolarCity CEO Lyndon Rive also made it clear that this is also a sound investment for Walmart, stating that this should be an example for companies to follow in the future. This is not the first time SolarCity and Walmart have worked together. The recently completed project will bring the total number of Walmart locations powered by SolarCity installations to 150, with Walmart’s largest solar panel system installed in Buckeye, AZ. Walmart’s stated aim is that the company will aim to install solar energy systems on at least 1,000 stores in the next six years.

SCTY was flying high in the month of May, hitting an all-time high of $52.77 on May 20 thanks to a one-two punch of bullish price action in solar stocks and Elon Musk-hype spilling over from his other venture. SolarCity has pulled sharply off its highs over the past month, though, losing nearly 40% of its value in that time. Part of the reason for the weakness during that period could have been anxiety about the IPO lock-up expiration, which came and went on June 11th without any major additional sell-off. With that event behind the stock and a large short float, you could see SCTY ignite to the upside for another squeeze. The first resistance level to watch is just below $38, and then the next potential long trigger could stand at the $40 area.

SolarCity operates in a solar industry that has come back into favor in a big way this year, and has the backing of one of hottest names on Wall Street right now in Elon Musk. Although the fundamentals haven’t nearly caught up to the hype, if SolarCity can continue to execute deals like the Walmart project, the future could be bright.

Disclosure: No positions

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