This ad has been simply unavoidable over the last couple days, and we covered the “headline” stock that Moors says has its tentacles in everay aspect of solar energy in yesterday’s piece… but the teaser pitch from Energy Advantage says there are two other stocks to be bought as well. What are they?
Well, time to find out. If you missed part one, which in addition to the answer to the first clues also included a nice bit of discussion from our readers (always among the wisest and best-looking), you can find it here.
And now… straight to the clues, please!
“… here’s my second ‘MUST’ solar play for anyone serious about making huge money fast.
“It’s the company that made solar available at night… and sold out in a week!
“This company has developed a way to store the endless power of the sun – anytime, anywhere – to be used on cloudy days and even at night!”
Well that sounds like an awfully big deal! How on earth did they make it possible to use solar power at night? What wizardry is this? More from the ad…
“I’m talking about solar batteries…
“Sleek, wall-mounted batteries with massive capacity. Powerful enough to store 10,000 watt-hours of electricity.
“The ramifications of this are rattling the industry.
“You see, until now, folks using solar had to stay plugged into the local utility company in order to maintain power at night, or on rainy days.
“Now you can capture energy while the sun is shining, and then store it for use during the evenings or when the weather gets rough.
“This new technology could ELIMINATE the need for utility companies, allowing individuals and corporations to go completely “off-the-grid” ….
“The Washington Post calls this company’s battery the ‘coming revolution in energy storage.'”
Ah… I bet you already know who this is. But just in case, a couple more clues:
“‘This company’s solar battery grabbed $800 million in its first week.’ – Bloomberg
“‘We’re basically sold out through the middle of next year – in a week!’ – said the company’s president”
So yes, this is Tesla (TSLA), which made a big splash with its “Powerwall” battery that’s designed to store energy from rooftop solar installations. Of course, it could well be that Moors is actually more interested in SolarCity (SCTY), since the two companies are effectively joined at the hip thanks to their shared controlling investor, Tesla CEO Elon Musk, wields over both firms (I think it might be against the law to refer to Musk without the adjective “visionary”, so hopefully this parenthetical comment will fulfill my legal obligations).
But yes, Tesla is really the battery company, regardless of whether it’s SolarCity or other solar customers who are interested in their batteries — and they sure are gearing up for dramatically higher battery production in the future with the building of their “Gigafactory” in the Nevada desert (that’s been teased plenty of times as well, of course, both because of their partners and because of the demand it will create for more lithium production — there was even a recent “Metal Oil” pitch for lithium that we haven’t covered yet, but it was discussed by readers here.)
Batteries, like the Tesla Powerwall, are much easier to build than electric cars, and probably much higher-margin if they can get volumes up… who knows, maybe someday Tesla will be known as a power storage company and the cars will just be a sideline. But for now, they’re a hugely capital-intensive automobile manufacturing startup that’s losing buckets of money and carries what I consider a wildly premium valuation. The shares trade for about 60X the average analyst-forecasted earnings for 2018. Now, obviously those forecasts are going to be wrong, and we won’t know for a long time whether they’re optimistic or pessimistic, but Tesla is the very definition of a “story” stock — it’s trading at these levels because people expect Elon Musk to change the world, not because the business is going to be earning a reasonable profit anytime soon. Maybe he will, I don’t know — there isn’t much reason to listen to me about Tesla, I’ve had trouble finding the valuation acceptable ever since it was in the mid-$30s early in 2013, and it’s well over $200 now, so I’ve clearly missed the bus on this one. Gigafactory and “Model 3” news will be the driver for Tesla over the next couple years, I expect, and I have no idea how that will go.
The cost is not crazy for consumers — it looks like the Powerwall, in terms of capacity and ability to run most of the electrical systems of a house for a limited time, is priced pretty similarly to the backup propane generator we have here on Gumshoe Mountain — though we have to have propane available for the generator to work and that costs money, with the flip side being that we can keep it going for months if necessary, as long as the propane truck can still deliver (the Powerwall is designed to just run the house at night when the sun’s not shining, but could also perhaps be a backup for a couple rainy, grey days when the photovoltaics don’t provide much juice).
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SolarCity (SCTY), likewise, is trading at a crazy valuation given current performance, even after getting cut in half this year — but they at least are building a network of installed homes and long-term cash flow, so there is the possibility, at least, that there will be some point at which it becomes scalable and provides a consistent utility-like return on capital. I don’t know if they have much of a differentiated position in the marketplace other than what they’ve built through very aggressive promotional spending, since anyone can install solar and there should be a lot of competition, but there’s some potential for a national brand and for economies of scale.
The numbers don’t indicate any kind of scalability yet, from my quick look at their financials it appears that each dollar of revenue they bring continues to cost more and more in both direct (cost of goods) and indirect (sales, marketing and overhead) expenses — this is a company being built based on a vision, as far as I can tell, not based on foreseeable financial metrics. Sometimes visions work and you just have to trust the visionary (as in Amazon, whose valuation I’ve also never been able to justify to my satisfaction, and to my portfolio’s regret), but you really do have to buy in to the vision and the future growth and not worry about the financials or you’ll give yourself a persistent headache or develop a Maalox habit.
And Dr. Moors has one other stock to benefit from the magical powers of silica and sun… here’s how he teases it:
“Now, let me show one more opportunity that you need to give serious consideration.
“I want to tell you right up front, this company is highly speculative.
“That means you take a little more risk, but the upside potential it offers is completely off the charts.
“And considering the technology they’ve developed…
“It’s possible this company could potentially deliver a 100,000% return, just like Paladin Energy did.
“This company, located a stone’s throw from the U.S. Department of Energy in Washington, D.C., is developing a breakthrough technology that could give power – and wealth – to every property owner in America.
“In short, they’re creating a see-through, invisible coating – like a decal – that converts existing windows into electricity generators!
“Once the coating is peeled onto the window, it operates like a regular panel, capturing sunlight and converting it into power.
“With 85 million commercial buildings and homes in the United States alone, the market is enormous, and completely untapped….
“And because the window coatings are made from two of the most abundant elements in nature – hydrogen and carbon – they just may turn out to be the first technology immediately affordable for anyone.
“Plus, they’re engineered to be as many as 50 times more efficient than regular panels, and can even absorb sunlight in shaded alleyways….
“The potential is staggering… and things are starting to move.
“The company has entered into an agreement with the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), and an announcement is pending on when these new window panels will hit the market.
“For investors willing to take a