Personal Finance

Why Vivint Solar Inc's Shares Fell 13% in February

Worker inspecting a rooftop solar installation.

What happened

Shares of solar installer Vivint Solar Inc (NYSE: VSLR) fell 13% in February, according to data provided by S&P Global Market Intelligence , as investors worried about the future of residential solar. In just the last two months, tariffs and raising interest rates have hit the industry and could make it harder to make money.

So what

Tariffs hit solar panel imports in January, so there may have been a hangover effect on Vivint Solar, but the bigger thing investors were looking at was continually rising interest rates. In just a little over two months of 2018, the 10-year Treasury rate has risen from under 2.5% to nearly 2.9%, which will lower the value of every contract Vivint Solar has on its balance sheet.

Worker inspecting a rooftop solar installation.

Image source: Getty Images.

Another factor investors are looking at is the sale of solar assets like 8point3 Energy Partners (NASDAQ: CAFD) and NRG Yield (NYSE: NYLD) , which both fetched fairly low values on the market. If solar developers aren't able to get top dollar for the assets they have, it effectively lowers the value of the underlying projects and a company like Vivint Solar.

Now what

The good news for Vivint Solar is that it's moving away from the leasing model to more solar system sales, which will offload the interest rate risk to customers. But there's no denying that Vivint Solar's projects don't have the same value they did a few months ago when interest rates were lower. If the company can generate a profit from the sale of solar systems, it'll reduce risk, but for now, the lower value of assets on the balance sheet isn't pleasing investors.

10 stocks we like better than Vivint Solar

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Vivint Solar wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

Travis Hoium owns shares of 8point3 Energy Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Personal Finance Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More