Kennouth
Investments, Learning, and Research
31
July 2013
What’s
in Solar’s Way?
Earlier this week, there was an
article posted by the Motley Fool blog on the subject of oil not being a major setback
for solar energy. But don’t get
complacent, big oil’s not going away anytime soon. While the growth of solar companies has been
outperforming the other energy sectors in many categories, its stock price for
example, they will start to face increasing competition from more traditional
companies. As mentioned in the Fool
piece, SolarCity has experienced incredible momentum this year. From 2011 to 2012, revenues more than doubled
from 59.5 million 128.6 million, they still reported a net loss of 91 million
dollars. However, two, Exxon Mobil and
Dutch Royal Shell, of the five world’s largest companies, are oil companies. And when you Yahoo! search “solar city,” Chevron
appears on the link list before SolarCity does.
SolarCity
Kennouth Investments bought this
stock in the past, made a generous amount of money, and has sold it since. SolarCity had their IPO on December 13th,
2012, and since its eight dollar debut, it first climbed all the way to
$52.17. After a correction, it also had
a profitable run from $32.66 to $44.98, a gain of almost 38%. At the same time, that’s a ton of volatility
worth risking for. They have been
reported to have great business models and forecasts, they’re in financial
agreements with powerful banks like Bank of America (BAC) and Goldman Sachs
(GS), and chaired by the founder and CEO of Tesla Motors, Elon Musk. This company does have a lot going for them,
but the stock is running out of steam, hitting a cushion at best. Since its 8% drop on July 26th, it
has struggled to stay or close above $42.50.
Technically, using Fibonacci levels on a six month low to high pattern,
it needs to break above about $43.75 for it to keep growing. Credit Suisse recently raised its 12 – month price
target on SCTY from $28 to $52. There’s
a lot of moving parts with SCTY, but maybe a little too much. They are involved with so many other
companies, Walmart and Honda being a couple more. Every headline and speculation shakes this
stock. I do believe the stock will reach
above fifty dollars again, but I would like to see it hold above or bounce off
around $38 before buying it.
Sunedison
Sunedison has been on the market
much longer than SolarCity has. Since
its founding ten years ago, the stock has definitely seen better days, as it
did pre-2008 when it reached $96. Now it’s
recovering at more than ten bucks from an all-time low of $1.44. And despite being at year highs, this is a
stock I wish I owned. If possible, this
is one of those stocks that traders would love to buy on a big dip. Studying the MACD, it’s of my belief that
SUNE has either finished a head and shoulder pattern, or is entering a new
one. I prefer the latter, because I’m
thinking it should hit at the least $12.50 and $17 at the most by year
end. Furthermore, should the stock drop
from here, there’s no way the bulls will let it fall below $9. To accentuate that belief, nine dollars is
already below the middle regression line.
But I’m not willing to lose ten percent, so I would wait till Friday’s
data reports before buying this one.
Cloudy, Stormy and
Clear Skies for the Solar Industry
The most probable competitor to
solar is most likely coal and oil companies.
Coal supporters are fearful of whole communities going jobless due to
mine shutdowns. But realistically, the
coal mining industry has been on the decline for decades, and I don’t see that
stopping. Oil is definitely going to put
up a lot more defense. With one third of
US workers making less than $24,000 (as reported by CNBC), the high price of
hybrid vehicles or Teslas is nowhere near economically feasible for a large
amount of people. And now in the near
future, Ford will be offering F-150s that run on natural gas.
The oil industry is also
undergoing another boom with shale and fracking technologies. These new methods and discoveries, called a “gift
from God,” by Jamie Dimon, will only make the oil companies more
profitable. But if there’s a degreaser
for the sludge, auto companies and the government are going to be a part of
it. That’s only going to come with
cheaper and similar cars to Tesla’s models, and a government incentivizing and being
able to compromise to produce effective legislation. While President Obama’s been in office, oil
production is at all-time highs, but blocking the Keystone Pipeline legislation
isn’t helping the prospects for oil investors.
He has also initiated plans to make the military 20% solar dependent by
2020. And companies like SolarCity and
Tesla probably wouldn’t exist if President Obama wasn’t elected. With the way Washington behaves and “legislates”
it does now, don’t expect much more stimulus from the government. Aside from the domestics, rebellions across
the Middle East, such as the ones in Egypt and Syria give more reason not to be
bullish on oil. Solar energy is on the
path to being the dominant means of electricity and power, but is it going to
happen tomorrow? No, no way.
Sources
CNBC
Charts
courtesy of TDameritrade thinkorswim software.
Disclaimer:
Trading stocks has extremely high risks, and should not be taken to lightly
without a thorough understanding. This is written from a purely commentary
point of view and is not meant to suggest buying, selling, or holding a stock.
All traders must do their own research prior to investing. We (Kennouth
Investments, Learning and Research) are unaffiliated with all of the companies
that are mentioned on this blog, and can't be held responsible for any
losses that may occur. Invest at your own risk.
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