Shares of Vivint Solar (NYSE: VSLR) jumped as much as 11.6% in trading yesterday after the residential solar installer reported third-quarter earnings that topped expectations. Shares gave up some of those gains as the day went on, but they closed up 6.8% for the day to lead renewable energy stocks.
Installations jumped to 65.1 megawatts (MW) in the quarter from 54.3 MW a year ago, and revenue jumped 33% to $103.8 million. Net loss increased by 76% to $13.8 million, or $0.11 per share. In the short term, losses can grow when installations rise because of the expenses incurred immediately to capture contracts that generate value for 20 years or more.
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From a value perspective, Vivint Solar is starting to pick up momentum as well. Retained value, a measure of the present value of all future contracted cash flows, increased to $2.19 billion from $1.93 billion a year ago. Management estimates there is $10.32 in net retained value per share. That's not a perfect proxy for how investors should value the company, but if net retained value per share grows over time, which it has from $7.15 two years ago, it makes sense that shares would rise, too.
The momentum of solar installations is certainly positive, and management said that storage demand is picking up, albeit from a small base, in Hawaii and California. I'm a little concerned about costs per watt rising to $3.48 from $3.16 per watt a year ago, but that's consistent with rising costs across the industry. Given the value Vivint Solar has on the balance sheet, this is a stock I think still has room to run.
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