A Win: Credit Suisse on SolarCity Buffalo deal

A big bank rave review of the Buffalo deal.

Claudia Assis wrote for MarketWatch 26 September 2014, SolarCity’s N.Y. factory deal ‘better than expected’,

SAN FRANCISCO (MarketWatch) — SolarCity Corp.’s solar-panel factory in upstate New York could allow the solar installer to reduce its costs and save about $400 million a year, analysts at Credit Suisse estimate.

SolarCity SCTY, -0.66% and New York struck a deal earlier this week, with the state announcing a $750 million package to build the solar-panel factory near Buffalo.

That deal “was significantly better than expected,” the Credit Suisse analysts said in note released late Thursday. SolarCity, which would lease the factory built by the state, would have to invest $5 billion in the area over 10 years.

It sets SolarCity up for a reduction in costs in upcoming years, a win even as SolarCity takes on execution risks and it doesn’t have expertise in manufacturing technology, according to the Credit Suisse report.

“Furthermore, we see little risk of underutilized capacity as SolarCity will continue to have a hybrid model, using their own factory for only a fraction of anticipated demand,” the analysts added.

Credit Suisse kept its “outperform” rating on the stock and a price target of $97, implying a 56% increase over early Friday’s share price.

Disclosure: yes, I do own SolarCity stock.